By Richard Lough, Reuters
ADDIS ABABA (Reuters) - Ethiopia's huge public spending has created one of Africa's fastest-growing economies, but volatile inflation, balance of payments pressures and a stifled private sector raise questions over its sustainability, the International Monetary Fund said.
Ethiopia's 85 million-strong population, making it Africa's second-most populous nation, offers an attractive market with cheap labour for foreign investors.
Across the capital, mushrooming construction sites, glass-clad office towers and giant billboards showcasing hi-tech electronics point to Ethiopia's emerging middle class. But idle youths loitering on streets and impoverished slums underscore some of the challenges facing the government.
Economic growth will slow to an estimated 6.5 percent this fiscal year from 8.5 percent in 2011/12, Jan Mikkelsen, the IMF's country representative in Ethiopia, said in an interview on Thursday."The amount of financing that those projects absorb is so large that it is crowding out activity in the private sector," said Mikkelsen, whose office overlooks a new superhighway running through central Addis Ababa.
Businesses struggle to access private credit and foreign exchange, curbing private sector activity and creating an imbalance between the private and public sectors.
"That imbalance is hurting growth over time and makes it more difficult to attract investors," he said, projecting growth would remain steady at 6.5 percent in 2013/14 as well.
Key sectors, such as banking and telecoms, remain firmly in government hands.
The government has reported double-digit GDP growth for much of the past decade, but some economists say that is inflated. The IMF's next annual review is due out in a month.
Growth has been driven by an expansion in services and agriculture. The main exports include coffee, horticultural products and livestock. Ethiopia is also a big aid recipient.
Addis Ababa's high public spending had fuelled volatile swings in inflation as the government bought hard currency, thereby flooding the market with liquidity.
Food and oil price shocks exacerbated swings that saw inflation scale 60 percent during 2008, fall into negative territory in 2009 before spiking above 40 percent in 2011.
FOREIGN INVESTMENT
That raised concerns regarding macro stability, Mikkelsen said. In the past 18 months, monetary policy has been tightened and the headline inflation rate slid to 6.1 percent in April.
"Our projection given the policy stance ... is that single-digit inflation will be maintained this year and next year," said Mikkelsen, adding this probably meant upper single digits.
The battle against inflation has been fought at the expense of the country's foreign exchange reserves, the main tool used by Ethiopia to mop up liquidity and which fell by some $1 billion between 2010/11 and 2011/12, according to the IMF.
At the start of this fiscal year running to July 7, reserves stood at about $2.3 billion, less than two months' import cover.
The government was on track to end the year with reserves steady, Mikkelsen said, but there are questions over how easily the government can sustain its spending programme while targeting single-digit inflation.
The Fund backs Ethiopia's efforts to build more roads and hydroelectric dams, but Mikkelsen said Addis Ababa could slow the pace of public sector investment to give private firms a bigger role, which would ease demand for domestic financing and attract foreign investors.
The state-owned Commercial Bank of Ethiopia controlled more than two thirds of the entire sector's assets in 2012, according to the IMF, while the only telecoms firm is state-run.
To lure foreign cash, Ethiopia needed to increase access to financial services, improve trade logistics and embrace private business as a force for development, Mikkelsen said.
"We think with the right policy close to double-digit growth is possible given the potential that is here in Ethiopia and given the interest that we see."
Massive energy, transport, IT and manufacturing projects require financing equivalent to roughly 15 percent of Ethiopia's estimated $33 billion annual national output. About half had to be domestically funded, Mikkelsen said.
Saturday, May 25, 2013
African Union: Continental drift?
Group celebrates its anniversary, but the verdict is still out on whether it is meeting the needs of ordinary Africans.
Addis Ababa, Ethiopia - The African Union headquarters complex in the capital Addis Ababa stands in stark contrast to its immediate surroundings.
The wide planetarium-like structure sitting comfortably attached to a $100m lightly glazed tower dominates the city’s skyline. Inside, the combined leadership of 54 nations gather in state of the art conference rooms to contemplate Africa’s future.
Outside the complex, taxi cabs jostle for parking space and pedestrians are questioned by security guards, while local residents navigate the grime and dust of urban life walking along narrow alleys.
The continental bloc might be celebrating 50 years on Saturday, but there is an unmistakable cynicism surrounding the nature and value of the union in meeting the needs of ordinary Africans.
The AU plans to host commemorative celebrations at a reported cost of $1.3m, despite ongoing conflicts and insecurity in five countries across the continent, including Sudan, the eastern DRC and Mali.
Disarray still reigns in Guinea-Bissau, the Central African Republic and Madagascar. Moreover, despite recent economic growth across the continent, living conditions remain abysmal for many average people, with the UN’s signature index suggesting that 24 of the 25 countries at the bottom of the human development index are African.
These types of statistics compel criticsto describe the AU as a talk shop, rudderless and crucially disconnected from African citizens like its predecessor, the Organisation of African Unity (OAU).
Change of focus
Joram Biswaro, Tanzania’s ambassador to Ethiopia, believes criticism of the AU is unfair and out of context. Despite its limitations as a continental bloc, the fact that Madagascar, CAR and Guinea-Bissau were banned from attending the summit for ongoing political irregularities signalled the AU was headed in the right direction, he said.
"Perhaps had it not been for this organisation, Africa might not have achieved what it has achieved … If you want to assess its performance, one should look at its charter,” Biswaro told Al Jazeera.
The original organisation, the OAU, built by 32 African nations originally on May 25, 1963, focused primarily on liberating countries on the continent from the grip of colonialism.
The OAU came under sever scrutiny for its inability to intervene in member states during times of strife, coups or government repression earning the name of "dictators' club" for upholding the interests of member country’s leadership above all else.
But since the formation of the AU in 2002, with a renewed focus on solving conflicts, engineering socio-economic development and improving governance, hard questions are being asked over the political will of the AU to reignite the lost dream of pan-Africanism.
During the Arab Spring of 2011, the AU was an anonymous spectator as a revolutionary fervour that was born in North Africa spread across the Middle East. The AU appeared to be particularly hamstrung in its response to the armed revolt against Muammar Gaddafi in Libya.
“The crisis in Libya was a very difficult time for the AU’s Peace and Security Council to reach an agreement,” reminisced Yemane Nagish, a political analyst at The Reporter Newspaper, in Addis Ababa.
It is this type of accountability, transparency and political will that needs to improve, says Ashebir Woldegeois, the chairperson of the Health, Labour and Social Affairs of the AU’s Pan-African Parliament.
Accountability issues
With 60 percent of its annual budget reportedly funded by overseas donors, it remains unclear how much political clout and independence the African Union can wield in reality.
Solomon Dersso, senior researcher at the Institute of Security Studies (ISS), says he has no issue with African countries partnering with outside groups to solve problems. Difficulties on the continent need to be viewed in proper context, he said, as some problems are come from outside sources, rather than from within Africa.
“The idea is not that only Africans should do it; the idea is that Africans should be at the centre for the search of solutions,” he told Al Jazeera.
Other observers wonder if ordinary Africans are actually at the forefront of the AU’s concerns. With so many Africans living in politically repressive regimes, like Equatorial Guinea, Ethiopia and the Gambia with limitations on freedom of expression, and restrictions on opposition parties, the AU is not yet representative of the African people, critics say.
“Despite being home to several of the world’s worst performing countries in terms of respect for human rights, the region saw overall if uneven progress toward democratisation during the 1990s and the early 2000s,” Freedom House, a US think-tank, reported in regards to Sub-Saharan Africa.
While elections are being held regularly across the continent, these apparent gains towards a culture of democracy are sometimes little more than masterful con jobs.
Election issues
Votes are scheduled this year for fragile states like Zimbabwe and Madagascar, and scrutiny has fallen on the efforts of the African Union to be an honest broker for democracy. In the past, Human Rights Watch has slammed the AU as an organisation ostensibly created to support democracy and freedom but wary of grassroots social movements.
Addis Ababa, Ethiopia - The African Union headquarters complex in the capital Addis Ababa stands in stark contrast to its immediate surroundings.
The wide planetarium-like structure sitting comfortably attached to a $100m lightly glazed tower dominates the city’s skyline. Inside, the combined leadership of 54 nations gather in state of the art conference rooms to contemplate Africa’s future.
Outside the complex, taxi cabs jostle for parking space and pedestrians are questioned by security guards, while local residents navigate the grime and dust of urban life walking along narrow alleys.
The continental bloc might be celebrating 50 years on Saturday, but there is an unmistakable cynicism surrounding the nature and value of the union in meeting the needs of ordinary Africans.
The AU plans to host commemorative celebrations at a reported cost of $1.3m, despite ongoing conflicts and insecurity in five countries across the continent, including Sudan, the eastern DRC and Mali.
Disarray still reigns in Guinea-Bissau, the Central African Republic and Madagascar. Moreover, despite recent economic growth across the continent, living conditions remain abysmal for many average people, with the UN’s signature index suggesting that 24 of the 25 countries at the bottom of the human development index are African.
These types of statistics compel criticsto describe the AU as a talk shop, rudderless and crucially disconnected from African citizens like its predecessor, the Organisation of African Unity (OAU).
Change of focus
Joram Biswaro, Tanzania’s ambassador to Ethiopia, believes criticism of the AU is unfair and out of context. Despite its limitations as a continental bloc, the fact that Madagascar, CAR and Guinea-Bissau were banned from attending the summit for ongoing political irregularities signalled the AU was headed in the right direction, he said.
"Perhaps had it not been for this organisation, Africa might not have achieved what it has achieved … If you want to assess its performance, one should look at its charter,” Biswaro told Al Jazeera.
The original organisation, the OAU, built by 32 African nations originally on May 25, 1963, focused primarily on liberating countries on the continent from the grip of colonialism.
The OAU came under sever scrutiny for its inability to intervene in member states during times of strife, coups or government repression earning the name of "dictators' club" for upholding the interests of member country’s leadership above all else.
But since the formation of the AU in 2002, with a renewed focus on solving conflicts, engineering socio-economic development and improving governance, hard questions are being asked over the political will of the AU to reignite the lost dream of pan-Africanism.
During the Arab Spring of 2011, the AU was an anonymous spectator as a revolutionary fervour that was born in North Africa spread across the Middle East. The AU appeared to be particularly hamstrung in its response to the armed revolt against Muammar Gaddafi in Libya.
“The crisis in Libya was a very difficult time for the AU’s Peace and Security Council to reach an agreement,” reminisced Yemane Nagish, a political analyst at The Reporter Newspaper, in Addis Ababa.
It is this type of accountability, transparency and political will that needs to improve, says Ashebir Woldegeois, the chairperson of the Health, Labour and Social Affairs of the AU’s Pan-African Parliament.
Accountability issues
With 60 percent of its annual budget reportedly funded by overseas donors, it remains unclear how much political clout and independence the African Union can wield in reality.
Solomon Dersso, senior researcher at the Institute of Security Studies (ISS), says he has no issue with African countries partnering with outside groups to solve problems. Difficulties on the continent need to be viewed in proper context, he said, as some problems are come from outside sources, rather than from within Africa.
Other observers wonder if ordinary Africans are actually at the forefront of the AU’s concerns. With so many Africans living in politically repressive regimes, like Equatorial Guinea, Ethiopia and the Gambia with limitations on freedom of expression, and restrictions on opposition parties, the AU is not yet representative of the African people, critics say.
“Despite being home to several of the world’s worst performing countries in terms of respect for human rights, the region saw overall if uneven progress toward democratisation during the 1990s and the early 2000s,” Freedom House, a US think-tank, reported in regards to Sub-Saharan Africa.
While elections are being held regularly across the continent, these apparent gains towards a culture of democracy are sometimes little more than masterful con jobs.
Election issues
Votes are scheduled this year for fragile states like Zimbabwe and Madagascar, and scrutiny has fallen on the efforts of the African Union to be an honest broker for democracy. In the past, Human Rights Watch has slammed the AU as an organisation ostensibly created to support democracy and freedom but wary of grassroots social movements.
| The idea is that Africans should be at the centre of the search for solutions |
Semayawi Party (Blue Party) leader on ESAT
The Blue Party of Ethiopia also known as “Semaiawi Party” has called for a public protest rally on June 2nd. ESAT’s interview with Semayawi party leader Eng. Yilkal Getnet.
Response to Law Professor regarding Haile Selassie and Eritrea
SelassieStandUp.org response to an International Law Professor (Greg
Fox)
SelassieStandUp.org wanted to share with you the exchange below with an International Law Professor who refused to sign the SelassieStandUp.Org petition, claiming that HIM Emperor Haile Selassie unjustly annexed Eritrea against the UN’s final decision. His response was prompted by SelassieStandUp.org call for action for a statue of HIM Emperor Haile Selassie to be erected in front of the AU building.Much as I dislike being negative in response to a project that you obviously value, I need to decline. I am perhaps too familiar with Haile Selassie’s undermining of the Ethiopian federation with Eritrea, culminating in his annexation of Eritrea in the early 1960s. This resulted directly in an awful 30 year civil war that killed far too many on both sides. This was an unforgiveable act and undermined, in my view, much of his other accomplishments. For someone who professed great faith in international organizations when he pleaded his case to the League of Nations after the Italian invasion of Ethiopia, the Emperor had surprisingly little regard for the federation, which was the result of a long and scrupulously fair United Nations process.Dear Fox,
Sorry but you’ll need to get your support from others.
Greg Fox
I appreciate your response. I think there is a lot of confusion when it comes to Eritrea. It maybe surprising to you, given your position regarding the Emperor and Eritrea, that internally (within Ethiopia) HIM Emperor Haile Selassie was viewed as someone who sympathized with Eritreans. Many Eritreans were promoted to high positions of power by the Emperor despite betraying Ethiopia during the Italian invasion at the expense of loyal Ethiopian patriots who fought beginning to end for Ethiopian freedom and independence.
The Eritrean separatist movement was also supported by countries such as Libya and Egypt, both which had their own strategic interests for doing so when it came to use of the Nile river and Islamic expansionism. As an American (assuming you are), I am sure you can appreciate President Lincoln’s statement that “a house divided against itself cannot stand,” in reference to slavery and Texas’ demand to secede from the Union. President Lincoln’s firm position led to a Civil War in which hundreds of thousands were killed (this was way more casualties over the thirty years of bandit rebel skirmishes you refer to). In the end, slavery was abolished and the Union remained in tact. I would think or at least hope you believe President Lincoln made the right decision. It would only be fair to judge HIM Emperor Haile Selassie in a similar context. HIM did not conform to everything the UN or US supported when it was in violation of international law and his philosophical beliefs (i.e., the Vietnam War which HIM did not support and spoke out against and Fascist aggression that the US and League of Nations condoned by their complacency).
By the way, HIM was a head of state, not a puppet of the UN or any other country. HIM came from the longest ruling dynasty. More importantly, Ethiopia’s territory included Ertirea which was colonized by Italy prior to HIM Emperor Haile Selassie arising to power. Therefore, HIM Emperor Haile Selassie only reclaimed what was Ethiopian territory. There are numerous historical facts that prove Ethiopia always had access to the sea and that present day Eritrea (actually beyond that) was part of Ethiopia. Unlike European colonialists, Ethiopia was not an aggressor. This is proven in the case of Somalia, post-independence. It was the Ethiopians that fought for their right to be free and independent in the UN.
The Ethiopians could have made historical claims to annex Somalia and could have easily done so, but they didn’t. In the case of Eritrea, there was a referendum and the Eritrean people voted to be reunified with Ethiopia. It was the so called Eritrean intellectuals backed by powers that always sought the disintegration of Africa and African peoples that created the perception that Ethiopia
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