- Economic growth has "rebounded strongly" in Ethiopia after a year of economic detraction., according to a new report. The country's vulnerability to external shocks and the extremely high poverty rate are seen as the main factors behind the instability of Ethiopia's economic performance.
According to the latest review of Ethiopia's economy by the International Monetary Fund (IMF), received by afrol News yesterday, trends are currently positive. During the last few years, as Ethiopia has implemented IMF prescribed economic reforms, the economy has boomed and detracted from one short period to another.
In the 2001/02 fiscal year, Ethiopia recorded a real GDP growth of close to 8 percent. The severe drought in 2002 - the worst in many years - caused real GDP to decline in the 2002/03 fiscal year. While the drought is still continuing, "real GDP growth has rebounded strongly" in 2003/04, according to a preliminary analysis by the IMF. No numbers of this growth were however given.
According to a statement by IMF Deputy Director Takatoshi Kato, Ethiopia's economic performance during the last three years nevertheless "has been good." The recently ended fiscal year showed economic growth, while price stability had been maintained and progress had been made with key structural reforms, according to Mr Kato.
- However, Ethiopia remains highly vulnerable to external shocks, notably drought and export prices, while poverty indicators continue to be among the highest in the world, the IMF representative said. The Fund is involved in a poverty reduction and economic growth programme with Ethiopian authorities.
The IMF analysis concluded that the Addis Ababa government needed to achieve faster growth, increase the economy's resilience to shocks and to ensure debt sustainability. This would "require both higher levels of external aid and improvements in Ethiopia's capacity to absorb and use such assistance more effectively," according to Mr Kato.
- A significant increase in external assistance to Ethiopia would need to be largely in the form of grants if public debt sustainability is to be maintained, the IMF representative warned. Ethiopian authorities were currently developing "a comprehensive and prudent public debt management strategy to clarify the rules for containing future domestic and external borrowing to sustainable levels."
In order to lay firm foundations for achieving a significant and sustained increase in long-term growth, the IMF held it was "essential to press ahead with structural reforms, focusing on agriculture, food security, capacity building, export promotion, privatisation and strengthening the legal and regulatory framework." This was currently being done by Ethiopian authorities.
The Fund in general found that Ethiopian authorities were living up to the economic reform prescription made by the IMF and therefore had decided to disburse about US $15 million as a last payment of a conditional loan totalling US$ 147 million. The loan was given under favourable interest rates and repayment conditions to finance what the IMF terms an anti-poverty programme in Ethiopia.
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