The imperative for serious deliberations on Ethiopia’s economy
Prime Minister Abiy Ahmed (PhD) raised an issue of paramount importance during deliberations with senior government officials at his office this Tuesday. He said, “Ethiopia is growing; but beyond that we have to look into and ensure how much its people have benefitted from the growth.” The equitable distribution of the wealth that the country’s economy generates among its people is a matter that should always be and is front and center. Aside from this two thematic areas requiring urgent attention are the manner transactions are conducted and the overall state of the economy. Any conversation on the economy must necessarily start from the supply of basic goods and services given they have a direct impact on the day-to-day lives of people. The acute shortage of these goods and services as well as the resulting spike in inflation is making life an ordeal for the vast majority of the population.
The dearth in the supply of food items has assumed such alarming proportions that in some places they are being rationed. Consequently, the prices of some goods have gone up at least four times within the space of a month. The double whammy of scarcityof goods and soaring inflation is liable to stoke social unrest. How can someone who spends over half of his wage on rent be effective on his job if he constantly worries his landlord will evict him if he cannot afford a sudden rise in rent? To make matters worse the remainder can barely cover, if at all it does, the inexorably escalating price of food, children’s education, medical treatment, clothing and the like. It is incumbent up on the government to seek concrete solutions to tackle this seemingly intractable problem in the short-, medium- and long-term.
Ethiopian’s economy is facing headwinds that threaten to stall the growth it has been continuously registering for over a decade now. Chief among is the unprecedented level of foreign exchange crunch. If a holistic effort underpinned by insightful analysis is not exerted immediately the economic slowdown it has prompted is set to get worse. In particular as the players in the manufacturing industry sector have said, the sector, which is already performing well under capacity because of the unavailability of raw materials, is faced with the prospect of coming to a screeching halt. To compound the hike in construction materials by 51 percenton average, anincreasing number of inputs are getting scarcer by the day. And though the import of medicine has long enjoyed priority in terms allocation of foreign currency nowadays such life-saving drugs prescribed by doctors as insulin are becoming difficult to get hold of posing a grave risk to patients.
The foreign exchange shortage has been exacerbated by the fall in export receipts as well as the allocation of the country’s meager reserve for things which are of little or no value. The illicit outflow of foreign exchange to the tune of billions of dollars annually is also another headache prodding the Prime Minister to call on members of the business community and government officials guilty of salting cash overseasto repatriateit. While this is something that should be done as a matter of principle regardless of its negligible contribution to augmenting reserve levels, it is exigent to take a series of corrective measures without delay. Coupled with the sporadic disruption in power supply the economic slowdown has adversely impacted the life of each and every Ethiopian leading to widespread resentment and the specter of instability.
The lack of affordable housing is one of if not the most critical manifestation of the social crisis elicited by the spiraling cost of living. Although the government has for over a decade now been implementing a condominium housing program in which it builds and delivers low-costapartments to citizens, most of the close to million people who enrolled in the program are frustrated by the fact that they are still awaiting the keys to the houses they were promised despite making the depositthey were told to. Unless a feasibility study is commissioned that brings about a fundamental change the problem-ridden programwill continue to be a source of public discontent. It would be better for the government agency tasked with executing the program to not pride itself on having transferred certain number of units and instead strive to narrow the yawning gulf between demand and supply. There is no shortage of citizens, whether based locally or overseas, who possess the wealth of experience needed to find the appropriate solutions adapted from the best practices of other countries. If the public does not see promising signs portending an end to the backbreaking cost of renting or owning a house it will not bode well at all for the government.
In general the gloomy prospect facing the Ethiopian economy is more likely than not to precipitate a crisis that has grim ramifications for trade and investment as well as other sectors of the economy. From street traders to large investors everyone stands to suffer if transactions decline. Compatriots subsisting on daily or monthly income are finding it extremely difficult to eke out a living due to the severe inflationary pressure. In view of the gravity of the problem the government is duty-bound to delay or shelve unviable projects and invest in the populace. However unpalatable such decision may be the government must make it in the interest of the welfare of the public. This should be backed up by measures intended to eliminate illegal practices that distort market conditions which in turn stoke inflation. Furthermore, it is imperative to overhaul unworkable policies and strategies with the goal of revitalizing the flagging economy. One would be wise to appreciate that an economic crisis is apt to be equally if not more destructive for the nation than political discord. Addressing the challenges besetting Ethiopia’s economy requires serious deliberations!