Ethiopia’s ‘Distorted’ Monetary Plan Needs Reform, IMF Says – Bloomberg

October 13th, 2011 Print Print Email Email

Ethiopia’s “highly distorted” monetary policy requires urgent reorganization because it is stunting growth and undermining macroeconomic stability, the International Monetary Fund said.

The Horn of Africa country’s five-year economic-development plan that starts in the fiscal year beginning July 8, 2010, and targets annual growth of 11.2 percent is “very ambitious,” the Washington-based lender said. The IMF projects output for the period will range from 6 percent to 8 percent a year.

“The main concerns stem from heavy financing needs that have not been secured, insufficient prioritization and the limited role envisaged for the private sector,” the IMF said in an e-mailed report today. “High and rising inflation and entrenched negative real interest rates also threaten Ethiopia’s macroeconomic stability.”

The coffee-producing nation’s commodity-dependent economy grew 8 percent last year, versus 10 percent in 2010, the fifth- fastest in sub-Saharan Africa after the Democratic Republic of Congo, Zimbabwe, Botswana and Nigeria, IMF data showed.

Expansion may slow to 6 percent in the fiscal year through July 7, 2012, from an estimated 7.5 percent last year, because of rising inflation, restrictions on private-bank lending and a difficult business environment, the IMF said on May 31.

Unrealistic

Ethiopia’s goal to reduce inflation to less than 10 percent, from 40.1 percent in September, won’t be easily achievable mainly because the central bank’s monetary policy is unsuitable to tackle rising prices, the IMF said today.

“Single digit-inflation projections in the plan appear unrealistic as long as a loose monetary policy and a heavy dependence of public-sector financing on bank credit continues,” the lender said.

The development plan envisions Ethiopia increasing crop production, boosting infrastructure and improving electricity generation to meet its growth goals.

Ethiopia plans to ramp up debt offerings to finance its planned 5,250-megawatt Grand Ethiopian Renaissance Dam, after raising 7 billion birr ($407.5 million) in bond auctions in the past six months, Communications Minister Bereket Simon said on Sept. 27. The 80 billion-birr hydropower project to build Africa’s biggest power plant is being funded domestically to demonstrate how Ethiopia’s economy is reviving, Simon said.

–Editors: Jennifer M. Freedman, Digby Lidstone

To contact the reporter on this story: Sarah McGregor in Nairobi at smcgregor5@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

  1. Derege
    | #1

    Meles and Bereket announced a breakthrough in their Economic resarch. The research was conducted using 85 Million ‘guinea pigs’ according to the authors. The duo claim that the panacea they discovered, dubbed ‘GTP’, will transform a country which was in a commatose economy for the last 20 years into an advanced nation where the 85 million ‘guinea pigs’ will feed ad-libibitum without side effects. According to the lead author, Meles, GTP stands for Growth and Transformation Plan. Bereket was quick to point out that other poor nations are requesting to import ‘GTP’ from Ethiopia. In a final note the two ‘economists’ noted that the smearing campagn by the opposition will not enable them win the Nobel Prize. Endreas Eshete on behalf of the AAU spoke that Meles and Bereket will be presented with PH.D degrees immediately.

  2. Ferenj Lebaw
    | #2

    Dinkem IMF said so.
    IMF is surprised that the Dictatorship in Ethiopia is distorting Montery Plans? Shouldn’t it be us asking the IMF why they intentionally have distorted monetary info for the dictatorship?

  3. ME
    | #3

    Who contributed such a great role to create this all mess in the first place?
    Is it not IMF and World Bank advice and patronage of Ato Meles regime under their economic medicine called SAP(Structural Adjustment Program)
    that created this all mess.This international institutes established under the Breton Woods Agreement after world war II are mainly intended to advance the interest of Anglo-American corporate interests under the disguise of international banner and hence are the main instruments that advance mainly the interest of the founders not poor countries.This sort of blaming Ato Meles or TPLF is their usual mod us-operandi like they do it in other countries.This is what is called “እንደ ጲላጦስ ከደሙ ንፁህ ነኝ ብሎ እጅን በውሃና በሳሙና እንደመታጠብ አይነት ነው፡፡”
    ነገር ግን እነዚህ አለም አቀፍ የፋይናንስ ተቋማት ብዙ የታዳጊ ድሃ ሀገራትን ድሃ ህዝቦች በመልካም አስተዳደር እጦት የሚገዟቸውን ሃላፊነት የጎደላቸውንና የሀገርና የህዝብ ቀናኢነት የሌላቸውንና በሙስና የተጨማለቁ እንደ አቶ መለስ ያሉ አገዛዞችን እንደ ዋነኛ መሳሪያ በመጠቀም አላስፈላጊ የብድር እዳ ውስጥ በመክተት ወደ ባሰ የድህነት አረንቋ ውስጥ እንዲገቡ እያደረጉ ነው፡፡ስለዚህም እነዚህ አለም አቀፍ የፋይናንስ ተቋማት በቀጥታም ሆነ በተዘዋዋሪ በችግሩ ላይ እጃቸው ስላለበት በየታዳጊ ሀገራቱ እናዳሉት እንደ አቶ መለስ ያሉት መጥፎና በሙስና የተጨማለቁ አገዛዞች ሁሉ እነሱም እጃቸው በደም የተጨማለቀ ነው ለማለት ይቻላል፡፡ስለዚህም ይህንን ሁሉ ቀውስ እንዲፈጠር የራሳቸውን ከፍተኛ አስተዋፅኦ ካደረጉ በኋላ አቶ መለስንና ወያኔን ብቻ ተጠያቂ ለማድረግ መፈለጋቸው ለእኛ ብዙም ያን ያህል የማይጠቅመን የአዞ እንባ ነው፡፡ነገር ግን በጣም የሚገርምኝ ነገር የጠላቴ ጠላት ወዳጄ ነው በሚል ጭፍንና ከንቱ የተሳሳተ አመለካከት ባብዛኛው ስለምንመራ አቶ መለስንና ወያኔን የሚያወግዝልንንና የሚያጣጥልልንን ሁሉ አስተሳሰብና አመለካከት ዝም ብለን በጭፍን ተቀብለን መልሰን እንደወረደ እናስተጋባዋለን፡፡ከዚህ በመነጨም ብዙ ተቃዋሚ ሀይሎች እነዚህን አለም አቀፍ የፋይናንስ ተቋማት ልክ የቅድስና ስራ እንደሚሰሩ መልአክ አድርገው በመቁጠር እነሱ ስለ አቶ መለስና ወያኔ የሚናገሩትን አሉታዊ አባባል ሁሉ በቅጡ ሳይመረምሩ መልሰው እንደወረደ ከማስተጋባትና አቶ መለስንና ወያኔንም በዚሁ ስሌት እንደወረደ ከመርገም ውጪ እነዚህንም አለም አቀፍ የፋይናንስ ተቋማት “እናንተስ ማን ሆናችሁና ነው እንደዚህ የምትሉትና አሁን ደርሶ የአዞ እንባ የምታነቡት?” ብሎ ያን ያህል የሚሞግታቸውና የሚመረምራቸው ተቃዋሚ ሃይል አለመኖሩ እጅግ በጣም የሚገርመኝና የሚያሳዝነኝ ነገር ነው፡፡የዚህች ሀገር ፖለቲካና አጠቃላይ ሁኔታ ከጭፍን ጥላቻና ከተራ ፕሮፖጋንዳ ተላቆ በዋነኛነት በምክንያታዊነት ላይ ተመስርቶ መቼ እንደሚመራ ግን አላውቅም፡፡

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