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IMF projects growth for Ethiopia

IMF projects growth for Ethiopia

The International Monetary Fund (IMF), in its latest report regarding the Ethiopian economy, projects the GDP to grow by 8.5 percent by 2018/19.

Growth is expected to step-up in 2018/19 to 8.5 percent, supported by a stronger confidence as the previous year’s uncertainties recede, and the availability of domestic and foreign direct investment improves, reads the statement issued by IMF.

The institution, which is the main global champion of liberalization of the economy and the privatization of key economic sectors, has applauded similar moves taken by the Ethiopian government. 

“The mission supports the ambitious reform agenda announced by the Prime Minister aimed at opening-up important parts of the economy to competition and encouraging private sector investments,” said IMF.

“The authorities’ strategy to shift the engine of economic activity to the private sector development while the public sector consolidates is appropriate to maintain strong growth,” adds the Mission.

The IMF, in its statement, has also indicated that policies to constrain public sector imports and borrowing as well as tightened monetary policy to reduce external imbalances were implemented which led to a decrease in external account deficit to 6.4 percent.

It is to be recalled that the same report by the IMF from last year indicated that Gross Domestic Product was estimated to grow by 7.5 percent.

However, a multiple of factors drag the economy behind.

“Political uncertainty, foreign exchange shortages, and weak prices for traditional exports hampered economic activity,” said IMF.

The IMF’s staff team was visiting Ethiopia for the past three weeks to conduct the 2018 Article IV consultation (Ethiopia). During its stay, the team got the chance to meet Prime Minister Abiy, governor of the National Bank of Ethiopia, Yinager Desse (PhD), Abrham Tekeste (PhD), Minister of Finance and Economic Cooperation.

During the meeting, the team has presented its key findings and recommendations regarding the Ethiopian economy.

In this regard, the team recommended taking a number of measures to hit the target as far as the estimated economic growth is concerned.

“The mission encourages the authorities to maintain an appropriately tight monetary and fiscal policy stance, along with a more flexible exchange rate regime, and implement reforms aimed at developing the financial system and markets,” said the IMF.

“These macroeconomic policies, combined with the announced reforms, will improve competitiveness, reduce external imbalances and rebuild buffers, while raising the growth potential of the economy over the medium term,” adds the statement.