World Economy

Ethiopia Performance Bodes Well for Future Progress

Ethiopia Performance Bodes Well for Future ProgressEthiopia Performance Bodes Well for Future Progress

Ethiopia’s incredible economic rise has enjoyed the lavish praise of many observers from around the world. The warm approval and admiration for Ethiopia’s extraordinary economic performance is becoming an ordinary thing that no more has the power to ignite the tendency to be satisfied with achievements as it did in the past.

IMF Managing Director Christine Lagarde has praised Ethiopia’s economic performance of the past few years as “strong” and having “positive prospects”. For good measure, she would like Ethiopia to exercise restraint in “public spending” while urging authorities to control borrowing from overseas to finance public projects and strengthen export competitiveness, Waltainfo reported.

Lagarde is the first senior official of the fund to visit Ethiopia since its founding after the Second World War. Currently IMF has 189 member countries and Ethiopia had joined the fund in December 1945. The IMF was established to help the member countries to achieve and maintain macroeconomic stability and that remains to be one of the core functions of the fund.

In an interview with (Addis) Fortune, Lagarde said, “The national authorities need to strike the right balance between addressing formidable development needs and maintaining debt sustainability. For many countries, this will mean strengthening efforts to improve public investment selection processes, implementation, and efficiency. Furthermore, governments should give priority to investments in human capital, especially investments in programs aimed at boosting healthcare and education.”

She said: “Ethiopia has enjoyed sustained high growth coupled with improvement in living standards over 15 years. The medium-term prospects are also strong: past investments in trade-enhancing infrastructure are starting to pay off. The challenge now is to manage a transition from public sector-led growth to a situation where the private sector takes the lead, something rightly emphasized in the government’s Second Growth and Transformation Plan.”

According to Lagarde, transitioning to private sector-led growth, as envisaged in the GTP II is important to create jobs, finance critical public services and reduce poverty. In parallel, the country’s current emphasis on exports addresses a key issue and helps Ethiopia to reduce the deficit of the external current account and alleviate the burden on the public sector to provide infrastructure services.

In this regard, a more extensive use of public-private partnerships, private concessions and privatization proceeds—as envisaged by the authorities—will safeguard public resources while helping private sector development.

The government’s restraint on public imports, particularly by public enterprises, helps reduce the external deficit; mobilizing domestic revenue and reduces the need to borrow abroad; and improving the business climate attracts domestic and foreign private investment, and raises competitiveness and exports.

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