The IMF chief highlights the potential benefits of Ethiopia’s economic reforms amidst challenges. Key liberalizations include a new stock exchange and currency deregulation, aimed at attracting investment. GDP growth projections are optimistic, with inflation rates showing signs of decline. Ongoing debt negotiations are crucial for the country’s economic future.
During a recent visit to Ethiopia, IMF Managing Director Kristalina Georgieva stated that the country’s economic reforms are challenging but promise substantial rewards. Ethiopia, home to approximately 120 million people, has enacted several liberalizing measures aimed at attracting foreign investment. Although the economy remains largely state-controlled, the nation launched its first stock exchange in the previous month and lifted currency controls last July, allowing the birr’s value to adjust significantly against the dollar.
The removal of the currency peg led to a depreciation of about 125%, though maintaining the previous rate was creating financial strain. The IMF had made this liberalization a prerequisite for releasing a $3.4 billion aid package. Georgieva emphasized the transformative potential of these reforms, forecasting a GDP growth of 8.1% in 2024, revised upward from an earlier estimate of 6.1%, largely due to increased private sector initiatives.
Prime Minister Abiy Ahmed has championed economic reforms since 2018, though the efforts faced setbacks from the Covid-19 pandemic, the Ukrainian conflict, and a civil war in Tigray, which reportedly cost the country around $20 billion. Inflation peaked at 33.9% in 2022 but decreased to 23.9% in 2023, with projections suggesting a further decline to 13.3% by 2026. Georgieva remarked on the importance of reducing inflation to alleviate pressure on Ethiopian households struggling with high living costs.
Ethiopia is currently negotiating a debt restructuring deal with its creditors after partially defaulting in late 2023. Georgieva noted that these discussions are nearing completion. Alongside her, Ethiopia’s Finance Minister Ahmed Shide reiterated the government’s commitment to its reform agenda, emphasizing that it is expected to create jobs and significantly benefit the populace.
Ethiopia’s economic landscape has undergone transformative changes in recent months as part of a broader strategy to liberalize its economy. The International Monetary Fund plays a crucial role in facilitating these changes by providing necessary financial assistance. Under PM Abiy Ahmed, reforms have been introduced to shift away from state-controlled economic practices. However, external challenges, like the Covid-19 pandemic and internal conflicts, have posed significant hurdles to sustaining economic stability and growth.
In summary, Ethiopia’s ongoing economic reforms, while politically and economically challenging, hold the potential for significant long-term benefits, including heightened GDP growth and reduced inflation rates. The IMF supports these efforts, underscoring their importance for attracting investment and fostering resilience within the economy. As Ethiopia navigates its financial challenges through debt negotiations, there is cautious optimism about achieving reform objectives that will improve livelihoods and create job opportunities.
Original Source: 24newshd.tv
