ADDIS ABABA – Prime Minister Abiy Ahmed said on Tuesday that the Ethiopian economy is faring better this year despite various challenges.
Authorities expect the economy to expand by 7.5 percent in the current 2022/23 fiscal year while the IMF set its growth projection for Ethiopia at 5.7%.
“Ethiopia’s economy is continually growing,” the PM told the parliament, inspite of the challenges induced by the spillover effects of the downturn in the global economy.
Ethiopia is a net importer of commodities that bears the brunt of high global prices and recurrent climate shocks.
“As our ties within the global community increase,” Abiy said, “the disruptions in the global economy also affect us.”
The PM has particularly mentioned four issues that are posing major challenges to the economy and needs addressing.
They are, according to Abiy, accumulated debt, Increased cost of living, gaps in Infrastructure, and differences between supply and demand.
In response to the issue of debt, the PM says the country has abandoned taking commercial loans and paid up 1.7 billion USD worth of loans.
The cost of living has been increasing for the past 20 years but the rate of inflation accelerated in the past few years.
The PM notes the issue of inflation is not limited to Ethiopia, saying 184 countries are facing similar challenges globally.
But, he continued, his administration will strengthen ongoing measures being taken to minimize its impact.
To absorb shocks felt by lower-income households, he says the government spent over 50 billion Birr to subsidize fuel and 21 Billion Birr in fertilizer subsidies in the past eight months.
To close the infrastructure gaps, “We are making great strides in the expansion of road infrastructure nationwide,” he said.
More than 22,000 kilometers of asphalt concrete roads are being built.
“They may be at varying levels of completion but a commitment to connectivity is driving the increase in road projects,” he added.
In his half year economic performance report to MPs, Abiy states that most of the macroeconomic indicators including agriculture, manufacturing, Foreign Direct Investment (FDI), and service sector have registered better performance than last year. The total export trade earnings, however, has shown a slight decline.
He has called the results registered in agriculture sector, particularly, “remarkable”, stating 6 million hectares of farmlands were cultivated through cluster farming in addition to summer wheat production on one million hectares.
“There is overall growth in agricultural productivity with the need to further enhance these achievements,” he said.
His report also says over 2.2 billion worth of FDI has flown into the country in the first seven-months of the current Ethiopian fiscal year, and 90 major projects have already become operational.
The gross national debt has continued to show a significant decline, dropping from 30.6% to 24.4% of GDP, as per the report.
Despite the positive developments in most macroeconomic indicators, the country saw a drop in its export trade performance.
Ethiopia secured a little more than 1.8 billion US Dollars in six-month export trade, achieving 77% of the target set by authorities.
The drop is mainly due to the contraband trade particularly gold and khat, Abiy told MPs, adding various steps are being taken to tackle the illegal act.
The government’s seven-month tax revenues increased by 28% to 210 billion Birr. But its expenditure shot up by 31% in the same period to 376 billion Birr.
Responses to man-made and natural disasters were mentioned among the reasons for the rising expenditure.