New Premier vouches for a strong economy

The newly appointed Prime Minister of Ethiopia, Hailemariam Desalegn, showed up before the House of People’s Representatives last Tuesday, a week after a Presidential Motion was heard. The motion described the achievements of the government on the economical, political and social front for the past Ethiopian year and laid its  plans for this year   on September 28, 2012 at the joint session of the house and the House of Federation. Even though  it is Hailemariam’s debut in parliament as Prime Minister, he  had to respond to a number of queries raised by MPs which  he  did, in a decent manner,  covering a wide range of issues from the political situation of the country to its economy.  He was asked to address and clarify the accomplishments of the Growth and Transformation Plan (GTP), natural resource conservation efforts, inflation, foreign reserves, quality of infrastructure development, election, fear of political shake-ups, religious extremism, and the press.
Growth:
Ethiopia hoped to register an annual average growth rate of 14.9 percent in its five year grand economic plan, the GTP, which ends in 2015. The country registered 11.2 percent economic growth in the first year of the governing economic plan, in the 2010/11 Ethiopian budget year. More was expected to be realized for the budget year completed on July 07, 2012. National macro economic growth performance accounting has not been completed yet according to Capital sources in the Ministry of Finance and Economic Development. This is in line with the best case scenario of the GTP as explained by the late Prime Minister Meles Zenawi when he presented the GTP.
“It is necessary to underline that registering an economic growth rate of more than 11 percent is a marvelous achievement for a non-oil producing economy like ours. Our growth is commodity driven, which lays the foundation for stable economic growth. Many nations aspire to grow like us. We need to aspire to stretch the limit of growth and achieve what is possible in our capacity. That is a mindset we wanted to instill in the minds of our people in order to cultivate change and reap its benefits,” argued the Premier in his response to a query from the MPs, while assuring that Ethiopia’s growth rate in the second year of the GTP will not be lower than what it was at the beginning of the plan.
Meanwhile, the International Monetary Fund and the World Bank cut Ethiopia’s growth forecast to single digits for the 2011/12 Ethiopian budget year. They predicted that the Ethiopian economy will register a growth rate of 6.5 and 7.5 percent respectively, in their annual report released recently.   
The President of the republic highlighted the government’s efforts to boost agricultural productivity while combating soil erosion and drought. He said that farmers are contributing, on average, 40 free labor hours in environmental conservation activity on a voluntary basis every year. The Premier also assured MPs that natural resource conservation activity will continue in a more structured and strengthened manner.
Taming Inflation:
The government has been promising to contain inflation at single digits since 2008, when it recorded a historic high of 60 percent.  Inflation skyrocketed to 40 percent at the beginning of the last budget year, but has now slowed down to 19.5 percent last month, mainly due to the government’s fiscal sterilization policy.
Hailemariam attributed the inflation situation to four variables; international commodity price hikes, increased foreign reserves, monopolistic trade structures and the wide gap between demand and supply in agricultural and manufactured goods.
He outlined restricting cash flow to the economy, importing major food items to narrow the gap between demand for major food items and supply, and increasing agricultural productivity, as mechanisms to keep inflation in single digits. He argued that increasing agricultural production is not only vital to hold inflation at bay, but also to ensure its role in the economy. He said that more than one million quintals of fertilizer and 1.2 million quintals of improved seed were used last Mehir, Ethiopia’s longest farming season, which lasts six months, to increase agricultural productivity.
The government introduced Farmer Training Centers and Agricultural Extension Systems to increase land and labor productivity. Agriculture is the backbone of the Ethiopian economy generating employment opportunities for almost two third of the Ethiopian population, which is currently estimated to be around 85 million, ensuring more than 85 percent of the country’s foreign earnings and contributing about 45 percent to the GDP, according to official sources.     
“The government has in place strict fiscal instruments in order not to finance budget deficits through borrowing from the National Bank of Ethiopia. We will continue to do so,” said the PM.
Foreign reserve:
Though there were reports from IMF highlighting that Ethiopia has foreign reserves that can cover less than two months of its import bill, the Prime Minister downplayed the statement saying the country’s foreign reserve potential has continued to swell after the country faced a severe hard currency shortage four years ago.
“The foreign reserve potential of the country continues to swell following better inflow of remittance, loans and grants, and increased export performance. In relation to the power reshuffle we have experienced, individuals have placed multiple demands for hard currency in different branches of banks. That is a result of pure speculation, but we don’t have a foreign exchange shortage,” argued Hailemariam.
Capital sources at NBE established that the lag in the Premier power reshuffle has contributed to a perceived shortage of foreign export, apart from the noted speculation.    
Though the data from the 2011/12 budget year has not yet been made public, Ethiopia has received USD 2.57 billon external assistance, USD 1.92 billion in grants, and USD 0.65 in loans in the 2010/11 budget year according to a report the Ministry of Foreign Affairs presented at the annual meeting of Ethiopian Diplomats held last August.  
GTP challenges:
Asked about the status of the GTP implementation and the challenges it has faced so far, he argued that things are going according to schedule. The premier underscored the main spirit embedded in the GTP is breaking the impossible mind set rooted in the minds of the public. He argues that his government has identified both the opportunities and challenges of the GTP from the outset and prepared a way out for the perceived challenges. He candidly admitted that the major challenge of realizing the mega projects envisioned in the GTP has been finance, and a shortage of labor.
“To solve the financing gap, we planned in advance how to sort it out. We worked hard to increase domestic saving through the introduction of public bond sales, introducing private pension funds, and opening financial institutions in unbanked areas,” he said.
The government aggressively worked to open one branch of the state owned banks, Commercial Bank of Ethiopia (CBE), in every Wereda and one more branch of micro finance institutions in every Kebele of the country.  For instance, CBE opened over300 branches in the past two years of the GTP, almost doubling the number of branches under its administration in the past 65 years of its operation to more than 550 branches.
The second mechanism the government followed was securing grants and loans from development partners and friendly countries to close gaps in financing mega projects in the GTP.
“We have succeeded in securing financing from development partners and friendly countries like China, India, Turkey, South Korea, and Brazil for the national railway project and other projects,” the Premier explained during last Tuesday parliament session.       
Apart from the billion dollar loan secured to finance the national railway projects last fiscal year, Ethiopia has secured a more than USD 1.15 billion dollar loan from the World Bank to finance basic social services like health, education, and economic infrastructure like road construction this past week.
“The National Railway Project is our grand project next to the Great Renaissance Dam. Ethiopia cannot afford to sustain its economic progress without building it in the coming three years of the GTP. It is a project that has no alternative but to propel Ethiopian development momentum higher,” said Hailemariam while explaining the importance of realizing the railway project.     
The Ethiopian government is engaged in the development of a multibillion dollar railway project aimed at connecting the four corners of the country, mainly through vendor financing.  More than 2000 km of rail lines are expected to be constructed in Ethiopia when the government’s ambitious five-year economic plan, the GTP, expires at the end of 2015.
He argued that his administration has delivered on issues related to labor shortages with regional authorities so that it will move from labor surplus regions to labor scarce one.     
Assuring infrastructure quality:
The Premier also candidly acknowledged the existence of quality concerns while responding to a question related to the quality of infrastructure development like telecom, power, roads, housing, health and education. He attributed the deteriorating condition of telecom service to four variables; overwhelming demand, high rise buildings, the cutting of fiber optics in different parts of the country and rolling blackouts.
“We have identified three reasons behind telecom service quality. We are in the process of expanding the telecom services to accommodate the increasing telecom demand. We are also putting up network towers on high rise building to solve the network signal blockage created by burgeoning construction development particularly in Addis Ababa. To get rid of the fiber optics destruction, we are planning to put the fiber cables up in the air with electric cables,” explained the Premier.           
However, experts in the telecom industry acknowledge the installation of second-hand telecom equipment was a cause for the deteriorating quality, in addition to what the Premier outlined. While explaining their argument the experts Capital talked to argued that the numbers of mobile phone subscribers is around 18.5 million while the installed capacity of the country is for more than 20 million subscribers.
Being aware of the quality concerns infrastructural development is facing, more than 3,000 engineers working in the area of design, construction and supervision enrolled for second degree programs at different universities in the country to ensure quality of road and housing construction according to the Prime Minister. He also described the ongoing work to ensure quality education.
“Education is a vital instrument of development. In order to assure its quality we have developed three different educational quality assurance packages that target building the skills and professional competency of teachers and students. The packages ensure the participation of teachers, parents and education administrators. We have witnessed its impact so far. For instance, less than 20 percent of students who sat for competency tests used to pass. After the packages were put into effect the figure has increased to more than 40 percent. It is a good achievement though much more needs to be done. I want to congratulate teachers for the vital role they have played,” said Hailemariam.
Good governance and democracy:
Hailemariam described the need to ensure good governance and democracy, as a question of life and death.
“It is a question of life and death. We don’t need to fall into a cycle of poverty again. We need to work day and night to ensure good governance and democracy. We know that there are still public offices where citizens are voicing their concern. We will do whatever possible in our capacity to solve the question of good governance. That is our stand as a ruling party and government. I call upon the opposition, as well as the general public to play their part, since it is work to be done in every segment of society,” said Hailemariam in his parliamentary response that lasted more than one and a half hours.      
Addis Ababa Election:
The City Council election for Addis Ababa City Government will proceed according to the schedule outlined by the National Electoral Board of Ethiopia.
“We will work to make the election free, fair, transparent, and democratic; one that will earn the trust of the general public,” said Hailemariam.
The Press:
In relation to the standoff between publishers and the largest printing press in the country, Berhanena Selam Printing Enterprises, the premier simply said that it is not the duty of the office of the Prime Minister to order printers to publish this and that newspaper.   
“I have received a letter of complaint from the Unity for Democracy (UDJ) that highlight the ban on the party’s newspaper. It is not the duty of the Prime Minister’s office to order a printer to publish a specific newspaper. There is no organizational structure that can allow such a practice. There are 34 printing presses in Addis Ababa; they can approach one of them if the other is not willing. It is a commercial issue that can be resolved in the frame of the Commercial Code of the country,” argued the PM.    
The UDJ blamed the printing enterprise, saying that a service giving institution refused to print its newspaper, “like an institution that is granted with the right to give or deny publishing permit.” “That is illegal. It is an act of censorship,” stated UDJ.