An economic council made up of experts from different corners could be formed by the constitution.
At an event organized by the Forum for Social Studies (FSS) under the title ‘Macroeconomic Policy and The Government’s Role in the Economy’, experts in the economic sector talked about the government’s economic policies.
At the event Alemayehu Geda (Prof), macroeconomics professor at Addis Ababa University and one of the two experts presented a paper on Thursday August 8 at Sapphire Hotel, saying that the government should form an economic council to lead economic policy professionally.
He recommended that the constitution mention the formation of the council based on the experience of other countries.
“The economic council has to be formed under the constitution as the experience of the US,” he said.
He hinted that the proposal regarding providing support in the sector and formation of the council has been sent by some experts to the Office of the Prime Minister about a year ago.
However the proposal did not get a response from the PM’s office.
Alemayehu recommended that several sub sector expert groups be formed under the council comprised from various experts in the sector from different areas and provide policy recommendations of the government.
The economic gurus who gathered during the day also recommended the creation of a structural policy to harmonize the economy as opposed to short insight measures like the devaluation, which almost all paper presenters and participants criticized.
Alemayehu argued that the ten year growth that the government mentioned as double digit is not more than 6 percent, while it is good achievement compared with continental performance stated as five percent from 2002-2013.
He said that the government has pumped huge capital into the developmental projects which shakes the macroeconomic performance.
Even though it has registered significant growth in infrastructure for instance on roads and education, lack of understanding of the developmental state theory the expenditure was not healthy and unable to come up with structural changes, according to him.
He argued that the national saving stood at 22 percent according to the government figure, while the investment is 40 percent of the GDP. “To fill the gap the country took huge foreign and local debt. On the other hand the government engaged in printing money which expanded the broad money that was 68 billion birr in 2006 to 740 billion in 2018 that means it has increased by 27 percent every year, which is about five fold of my expectation of the incremental rate on the broad money,” he said.
This situation has created inflation, and the loan that transferred to government and its supporters’ elites created inequality and capital flight, according to Alemayehu.
The investment that is more than the savings has expanded the difference of balance of payment and created the hard currency shortage. To solve the macroeconomic imbalance and expand the export the monetary policy should not be a solution, according to Alemayehu.
He argued that as per his communication with investors the challenge is not devaluation but access to land, finance, customs, infrastructure, power outage. “So if we want to expand the export we have to focus on the structural policy change as opposed to monetary policy,” he explained.
He also argued that the economic growth has not achieved structural change due that poverty and unemployment are not reduced.
He recommended knowledge based technical and political intervention besides professional bureaucracy is required for further achievement and stated the experience of Ethiopian Airlines. “The role of the private sector should continue. Apply democratic developmental state and use all different interest on the international ideology to grab the benefit from all sides, and technical and institutional development and political consensus should be built,” the economic guru recommended.
He criticized the ruling party EPRDF saying it is using developmental state ideology without skilled and knowledge based labour.