ADDIS ABEBA – International Monetary Fund (IMF) said an extended period of international isolation has left Eritrea’s economy in a difficult situation.
IMF’s team has been on a 10-day visit to Asmara since May 13, during which they held their first consultative discussions with the country’s officials in 10 years.
After the visit, the team of experts said the country’s economy – dominated by agriculture and mining – is in a difficult economic situation.
They attributed this to an extended period of international isolation that the country has been, and its officials’ emergency measures to manage the economy.
Data estimates show that GDP fell sharply in 2017, driven by the regional drought. The real GDP growth is expected to have recovered in 2018, though.
– Welcomes Peace Deal –
IMF called the peace agreement with Ethiopia and lifting of international sanctions “a welcome opportunity for Eritrea”.
“Eritrea has just emerged from twenty years of conflict with Ethiopia and a decade of sanctions imposed by the international community.
“The war and the international isolation deprived the country of vital investment, trading opportunities, and external support, and have left the economy in a difficult situation.
“The peace agreement with Ethiopia and lifting of international sanctions provide a welcome opportunity to build an impetus for economic development and to begin implementing much-needed reforms.”
– Promising prospect –
In recent years, IMF said, the government’s policies have tried to adapt to the difficult conditions prevailing in the country.
But, it said, “a sustained period of high fiscal deficits—reversed over the past three years—has led to a heavy public debt burden”. The banking sector “is vulnerable and foreign exchange is scarce”, it added.
The Fund said, “looking ahead, the near-term outlook for real GDP growth is challenging due to the tight fiscal situation and existing restrictions on economic activity”.
“Over the medium-term prospects for a pick-up in growth are promising, including due to new mining projects coming on stream,” it said.
“Policies to restore the health of the fiscal and financial sectors will be central to ensuring macroeconomic stability and broader economic reforms will help to deliver inclusive development”.
Despite economic pressures, the Fund hailed Eritrea’s “remarkable progress on some development goals, notably in the health and education sector, and prioritized public investment in the earlier years.
The IMF said it stands ready to support economic reforms in the country through policy advice, technical assistance, and training to help achieve macroeconomic stability and inclusive growth.