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IMF chief calls for opening up of economy

IMF chief calls for opening up of economy

Advocated flexible monetary policy

During a historic first visit to Ethiopia by a head of the International Monetary Fund (IMF), its managing director, Christine Lagarde, stressed that there was no harm in letting the private sector operate in the economy.

At a joint press conference Friday with Vera Songwe, executive secretary of the United Nations Economic Commission for Africa (UNCEA), the IMF chief said she strongly believes in the involvement of the private sector to bring about competition that would improve productivity in the country.

 “I personally believe strongly, and I think many in the IMF do, that more competition is conducive to improve productivity,” Lagarde said. She added that state-run enterprises are not necessarily competitive and productive, and noted the private sector should be given the opportunity to play a role.

“Not every state-owned enterprise is as good as Ethiopian Airlines. May be Ethiopian Airlines was a little bit opened up so that there will be equity coming in from the private sector, it would give good resources to Ethiopian authorities to invest in utilities that would help everybody”. She stressed that sharing some of the stakes with the private sector would not necessarily mean that Ethiopia loses its sovereignty.

When asked about her strong support to the policies of the government and about her positive views, Lagarde argued: “not always 100 percent positive,” but with balanced views she and her team engage with the authorities.

While welcoming the measure by the government to institute a 15 percent reduction of the purchasing power of the birr against US Dollar, she, however, recommended that the authorities introduce a flexible monetary policy [exchange rate regime]. Doing so will support an export-driven economy, Lagarde suggested. According to Lagarde, drive for export would lead to reduction of trade imbalance that the country has been suffering from for long.

On matters of the operations of the IMF office in Ethiopia, the chief counterclaimed that the office is functioning well and feeding her staff the needed information about Ethiopia. Yet, she said the office does not have IMF staff from Washington but has representatives operating out of Addis Ababa. It is to be recalled that last year she assigned Abebe Aemro Selassie, an Ethiopian, to run the African department with the IMF.

Talking about African economies, Lagarde said there are some countries seeing a decline in their per capita incomes. She noted that 17 countries (representing 40 percent of Africa’s population) are facing such the situation.

Seconding the managing director, Songwe said that both the IMF and UNECA needed to work in collaboration to alleviate some of the pressing challenges countries of the continent are faced with. She said that the “two foxes” which have met for the first time at UNECA premises have to forge ahead for the betterment of the people across Africa. 

During her two-day visit to Ethiopia, Lagarde met with President Mulatu Teshome (PhD) and Prime Minister Hailemariam Dessalegn. She also visited the Eastern Industrial Zone built by a Chinese firm. Her public lecture mostly focused on the virtues of technology and the role of women in Africa and beyond.