Cutting through the Corruption Loopholes

Ethiopia has been grappling with foreign currency shortages for many decades. Despite this, the country’s import figures have been growing, reaching an all-time high in 2021/22 with USD 18 billion, up from USD 14.2 billion recorded in the previous year. Such a staggering increase in imports has further widened the trade deficit. This influx of import transactions involves numerous stakeholders. However, the cumbersome bureaucracies in the customs system, rampant corruption, and exorbitant duty levy have created immense frustration for importers and manufacturers. 

EBR’s Selome Getachew navigates the hurdles in the import processes and how custom procedures, which change now and then, frustrate importers. 

Ethiopia’s Perplexing Fiscal Dilemma

 The Ethiopian government has approved a budget of ETB801 billion (USD15 billion) for the 2023-24 fiscal year, which began on July 8. The budget, equivalent to 7.1Pct of anticipated GDP for the year, prioritizes pro-poor sectors such as infrastructure development, education and health but reduces capital expenditure and freezes public sector new recruitment. The Government is seeking USD12 billion in funding based on its 2023-2027 macroeconomic and fiscal frameworks. Critics have raised concerns about debt servicing’s impact on priority spending and the potential hindrance to infrastructure development and job creation from reduced capital expenditure EBR’s Bamlak Fekadu highlights the forecast for the new fiscal year, the budget deficit, inflation, import growth, the allocation of funds for different sectors and regions, and also look into the impact of Direct Advances on the economy.

Ethiopia, a country rich in natural resources, has one of the most varied agro-ecological settings. The country’s diversity makes it suitable for growing hundreds of crops, with 74.3 million hectares of arable land spread over 18 major agroecological zones at altitudes ranging from 148 metres below sea level to 4,620 metres above sea level. The country is also home to a large number of livestock resources. Ethiopia’s agricultural sector plays a crucial role in the country’s economy, employing over 70Pct of the population and contributing to more than a third of the GDP. Despite promising results, it has yet to realise its full agricultural potential due to subsistence-oriented farming practices, limited technology adoption, sub-optimal agronomic practices, and a heavy reliance on rain-fed farming. Conflict and severe drought records have resulted in poor crop output, limited market access, income loss, and substantial postharvest losses. As if that were not bad enough, farmers now deal with acute fertiliser shortages, writes EBR’s Bamlak Fekadu. 

Execution, Literacy Challenging Transformation

Ethiopia’s economy has been affected mainly by peace and security challenges. Shortage of forex, dwindling industrial outputs, and inflation, among other challenges, have stood on the economy’s throat, leaving it gasping for air. Amidst these dark moments in the economy, Prime Minister Abiy Ahmed’s (PhD) administration has shown a solid commitment to one thing: digital transformation. Last month, the Ministry of Transport and Logistics implemented a digital payment system at fuel retail, banning cash payments throughout Addis Ababa. Since the announcement, operational gas stations have been chaotic. Despite the multi-facet advantages of digital payment, enough preparations to work on the digital literacy of the public are necessary for a seamless transition into the modern way of payment. Moreover, the details of the execution of the digital transformation need to be well thought out, writes EBR’s Bamlak Fekadu.

Technology is transforming the digital economy, and digital financial services (DFS) are vital facilitators. DFS is expanding access to and use of financial services, emphasizing affordability and improving access to credit through a new digital lending system. As a result, new environments have been established to meet more demanding clients, with neo-banking being the new paradigm threatening brick-and-mortar banking.

Financial service digital technology innovators are driving growth, and the market is changing rapidly. DFSs are a critical enabler of a digital economy in which access to finance is essential. FinTechs, in alliance with commercial banks and microfinance institutions, are increasing access to and usage of financial services while emphasizing affordability. They are also setting new trends by fostering access to credit through a new digital lending scheme.

Ethiopia has 1.3 million registered vehicles, of which 84 Pct are used in the transport business. The ride-hailing industry provides an estimated 90,000 rides daily, using mobile technologies. Petroleum products are imported for USD 3 billion, increasing the demand for gasoline by 14 Pct on average per year. In this article, EBR’s Bamlak Fekadu assesses the landscape of the growing digitalization of the Ethiopian economy with an emphasis on digital payment systems.

As Government Unplugs Support System Too Early

Globally, no other industry has been hit as hard by the COVID pandemic as the hospitality industry has. With severe restrictions on travel, hotels shutting down, and tourist attractions deserted, the world has experienced the first disaster of its kind in decades. In Ethiopia, the hospitality industry experienced a double blow from the pandemic and a series of security challenges nationwide. As if the series of security challenges were not enough, the country plunged into war in 2020, affecting famous tourist attractions such as Lalibela and Al Nejashi Mosque. Even though the government showed a gesture of goodwill to support the industry through tax related incentives, tourism remains too broken to revive after brief painkiller measures, write EBR’s Addisu Deresse and Eden Teshome.

Endowed with abundant natural resources, Ethiopia has one of the most diverse agro-ecological configurations in the world. With 74.3 million hectares of arable land spread over 18 major agro-ecological zones at altitudes ranging from 148 meters to 4,620 meters above sea level, the country’s diversity makes it suitable for growing over 100 types of crops. Agriculture forms the biggest component and bedrock of Ethiopia’s economic development, contributing to about 32.7 Pct of the country’s GDP and 65.6 Pct of employment. With 85 Pct of Ethiopia’s 105 million people living in rural areas, the agriculture sector primarily consists of smallholder farmers who make their living from less than one hectare of land. The agricultural sector has reported considerable growth rates over the past decade as the result of an estimated doubling in the use of modern farm inputs, rapid expansion of arable land, increased labor productivity, government investments in the extension system, and an improved road network. The light of hope in the farming fields, however, is dimmed by startling losses following harvests, writes EBR’s Bamlak Fekadu.

The bars of gold, the diamonds, the gemstones, and the oil were stories Ethiopians have lived with about the riches of their country under the earth. Not materialized enough to change lives, those stories have remained a myth. Even though various administrations admitted the economic value of gemstones and mining in general, the lack of proper policy and legal frameworks, skilled labour, private investment, and market promotion at local and global scale have challenged the robust growth of the sector. This seems to be the thing of the past as the current administration of Abiy Ahmed (PhD) has put the sector at the heart of its ten-year perspective plan. With an overhauled institution under the leadership of Takele Uma (Engi.), the Ministry of Mines is set to enable the country make the most out of its mineral resources. Even though there are still high hopes for gemstones with positive global market prospects, production is still challenged by conflicts, parallel markets, and artificial products, among many other challenges, writes EBR’s Bamlak Fekadu.