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Global economy plays a role but stagnation has been developing over two years
Ethiopia’s exports have bucked a trend and not performed as well so far this year.
For the last several years, the Ethiopian export sector has been growing consistently, though not reaching the targets set by the government. However, for the first time in recent history, the revenue generated from exports, in the 2012/13 fiscal year, declined when compared with the previous year’s performance.
The past six month’s performance is nearly 35pct lower than the target. During the first half of the 2013/14 fiscal year, which is from July 8, 2013- January 8, 2014, the country earned USD 1.311 billion from exports. But the government hoped to earn USD two billion during this period, which is 65.5pct of the goal. This is surprising because over the past decade exports had been growing and it is concerning because even though figures are still rising, exports were growing at a slower rate over the last 18 months.
In fact exports are 7.3 percent lower than the first six months of the 2012/13 fiscal year. This means that over the past two fiscal years (since 2011/12), even though exports have been rising; they have not been going up as rapidly as they had before. The last six months is the first time that exports have actually declined however.
Not all exports decreased, manufacturing and oil seed exports registered significant growth in the first six months of the fiscal year but agricultural products and mining declined. These were the only two sectors to decrease but farming is how a majority of Ethiopians earn their livelihoods. Coffee, Ethiopia’s largest export item and one that earns a lot of foreign currency went down significantly compared with the first half performance last year and this year’s targets. Part of the reason for this is that coffee’s value depends greatly on the international market. In the past six months Ethiopia exported 66,066tns of coffee, netting USD222.56 million but just 66.8 percent of the target because the government hoped to generate USD333.1million and export 85,186tns. According to the half-year report, the coffee trade has constricted 28 percent by volume and 38 percent by value compared with the past year achievement.
Other agricultural exports that decreased were oilseeds, flowers and pulses, although pulses, like khat, performed better than other farm products.
In Ethiopia, the most prominent oilseeds are sesame. These seeds brought in USD 208.8 million over the past six months. This is 76 percent of the target, which was USD 273.2million, although oilseed exports have been growing rapidly over recent years.
Pulse exports brought in USD 107 million, 84 percent of targets. Khat, was closer to its goal raking in USD 150 million or 92.6 percent, over the past six months.
Flower exports decreased reaching only 54.8 percent or USD 84.5million but it did grow 2.7 percent, compared with the first half of last fiscal year.
Even though the government hopes to expand fruit and vegetable investment and export, its performance is very weak. The government targeted USD 62 million from vegetable and fruit exports in the first six months of this fiscal year, but the actual achievement was 36pct of the target or USD 22.3million.
MoT planned to earn USD 1.07 billion from farming in the first six months of this fiscal year. Instead, they earned USD 815.7 million, 76pct of what they had hoped for.
The other sector that registered lower performance in the past six months is mining. In the extraction industry gold has been raking in a lot of money for the nation recently as people have begun finding more of it here and the price on the international market has been increasing. However in the first half of this fiscal year gold exports only met 59 percent of their targets.
According to Ministry of Trade (MoT) report, some sectors did see their exports increase compared with first half of the past fiscal year but they failed to meet targets.
Exports were supposed to bring in USD 328 million but instead they earned USD 194 million. Some of the blame lies on the international markets which saw prices for gold and coffee decrease over the past six months.
In general, the hard currency generation from mining contributed USD 199 million in the first half year, which is 28 percent lower than the similar period in the past fiscal year. In the first six months of the past fiscal year the country generated USD276.6 million form mining exports.
Changing from an agricultural led economy to an industrial one is a major Growth and Transformation Plan priority and the report indicated that industrial exports did earn more revenue during the stated period but only slightly more and less than half, (47.7 percent) of what they had planned on.
The ministry wanted to earn USD 366.5 million from manufacturing, but the sector contributed USD175 million.
Leather and leather product exports on the other hand excelled, amassing USD 9.7 million; higher than the USD 57.4 million in revenue the sector earned a year ago.
According to the report, Ethiopia exported USD 57.5million worth of garments and textiles. Yet, the goal was USD 111.8 million, although it is still a 27 percent increase compared with last year.
Last year’s export performance report indicates farming; mining and industrial exports earned a combined USD 3.08 billion. The performance shows a slight decrease when compared with the 2011/12 budget year’s performance that managed to rake in USD 3.15 billion birr in revenue.
The performance of the past budget year is also USD one billion less than the target set by the Ministry which is a little over USD four billion.
By the end of the GTP, (June 2015), the government dreams of USD 10 billion from exports. A large part of Ethiopia’s plan to become a middle income country depends on producing more goods here and then exporting them to other nations instead of relying on imports. Many developing countries face an uphill climb when trying to improve the economic lives of their citizens because the playing field is not level, as a result they end up selling raw materials to foreign investors who then add value to them and earn huge profits or rely on ‘cash crops’ and other natural resources that are then exploited by large foreign corporations who do not offer a fair exchange. Countries that have successfully developed in the past like China and India have done so by making their own products and exporting them in large numbers. When India first gained independence Ghandi saw this as the only way to achieve true freedom, one economic expert said. The Ethiopian government is counting on exports increasing dramatically and consistently in order to meet their many development goals. For this reason even if exports still rise, when they appear to be leveling off it is a cause for concern.