Eritrea’s Macroeconomic Situation Still Dire

ADDIS ABEBA – International Monetary Fund (IMF) has said Eritrea’s macroeconomic situation remains dire despite some notable progress in the health and education sectors.

The IMF says this after its executive board concluded on Monday their Article IV Consultation with the State of Eritrea.

Eritrea has recently emerged from a long period of conflict and international sanctions.

The situation has been deprived the country of vital investment, trading opportunities, and external support, and left the economy in a difficult situation.

Nevertheless, authorities have made considerable progress on some development goals, notably in the health and education sectors, the fund says. It, however, says the macroeconomic situation of the country remains dire.

“A sustained period of high deficits, financed through monetization and external borrowing, left Eritrea in debt distress,” the statement reads.

Eritrea’s economy is still dominated by agriculture and mining. It is highly vulnerable to shocks, IMF warns.

The near-term outlook for real GDP growth is challenging due to the tight fiscal situation and existing restrictions on economic activity, according to IMF.

“Over the medium term, prospects for a pick-up in growth are promising, including due to new mining projects that are well advanced coming on stream,” it says.

The peace agreement with Ethiopia and lifting of international sanctions provide a welcome opportunity for the country to build an impetus for economic development, the Fund says.

Now is time to begin implementing reforms to accelerate the development process, it says, welcoming the authorities’ intention to pursue an economic development strategy that envisages a strong role for the private sector.

The Fund’s directors also underscore the need for significant reforms and investment, public and private, are necessary to diversify the economy and reduce its dependence on agriculture and mining.

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