Gov’t plans to alleviate forex crunch
The Government of Ethiopia (GoE) is preparing a three-year financial program to overcome the country’s daunting financial challenges, Eyob Tekalign (PhD), State Minister of Finance, said at the fifth Annual Private Equity in East Africa Conference held at Sheraton Addis Hotel on June 13, 2019.
Speaking on a panel, Eyob added that this project is currently handled by the National Bank of Ethiopia (NBE) and it is meant to identify the forex needs of the country, the areas of government intervention and the source of finance over the coming three years.
“This will definitely solve the forex problem in the country,” he said adding, “Part of the forex problem in the country was the way it was managed.”
Eyob further indicated that this specific program was drawn based on the Macroeconomic and Fiscal Framework (MEF) which the government has developed for the coming five years. MEF identifies the amount of expenses as well as the sources of finance the country needs for its budget. The financial program, among many, looks into the amount of forex the country needs, the source of the finance, and what the government could do in order to get access to these sources.
Responding to The Reporter’s questions after the session, Eyob said that the program is being drafted and not yet approved for implementation.
“Although I could not tell you in exact terms, the program indicates that the current forex shortage in the country will be decreasing within this period of time,” Eyob foresees.
This program also includes an intervention by the government to leverage national capacity to generate more forex from sectors like mining. Eyob admits that, while potentially capable of generating the much-needed forex, projects like gold, oil and so on did not perform well because of some policy issues.
“Now we are looking into them and they will definitely be meaningful sources of forex for the country,” Eyob indicated adding, “It is part of the financial programming.”
Another target for the government to generate forex is the Tourism Sector which Eyob says is hampered because of factors like inefficient visa processing and lack of capacity to effectively identify and promote tourism sites.
“When the Addis Ababa River Side Project gets completed and when other tourism initiatives are put in place, they will play a great role in meeting tourist expectations,” he said.
The other sector that the financial program takes into consideration is the completion of energy projects which were planned to generate forex from exports, but lag because of various factors. Eyob said that projects like the Grand Ethiopian Renaissance Dam (GERD) are given due attention so that they are completed to bring balance between forex demand and supply.
Admitting that the export performance of the country has been declining for the past decade, mostly attributed to structural problems, Eyob said that sector problem identifications has been made and a set of solutions is put in place to be implemented soon, so that the export sector plays its role in alleviating the forex crunch.
In addition, the investment engagements of state-owned enterprises, their means of financing proposed projects as well as project appraisal processes has been reconsidered.
“This brings a paradigm shift to the belief that projects initiated by the government are always right. State owned enterprises have to be agile like any other private entities which are market led, have capable leadership and are competitive,” Eyob said.
In this regard, the management of SOEs and bringing about structural transformation is given attention, according to him, a rationale behind the formation of State-Owned Enterprises Holding Agency congregating all SOEs under it.
Eyob makes an example out of Ethio Telecom which was detached from its creditors, partners as well as employees. To this effect, a recent discussion with China on the sidelines of the Belt and Roads Initiative (BRI) enables Ethio Telecom to negotiate credit without government’s intervention like Ethiopian Airlines.
The government as well as SOEs will no longer engage in projects that are not feasible, which was a reason behind the debt distress and disorganization, he added.