IMF Managing Director welcomes devaluation, voices concern on debt burden for Ethiopia

Managing Director of the International Monitory Fund (IMF) Christine Lagarde visited Addis Ababa and held discussions with Ethiopia’s Prime Minister and President. During the discussions with media on Friday, December 15, 2017, Lagarde stated that the IMF welcomed the 15 percent devaluation on the Birr but also called for a more flexible monitory policy.
“We welcome the devaluation that took place by 15 percent and I also indicated to the authorities that we would believe in order to support an export driven policy which is currently advocated by the authorities, a more flexible monitory policy would probably be more appropriate, and that is what we are recommending,” she stated.
She further underlined that to address imbalance that is currently seen in trade and boost more export is within reach if the right measures are taken, including in terms of monitory policy.
“I think we are a short while away from shifting to more export, less import, the terms of competitiveness are improving and this is certainly something that we support,” she stated. Mentioning concerns, Lagarde mentioned that there are issues with debt burden and debt service.
“There are areas clearly in terms of debt burden and debt service where we are concerned and where we hope that the situation can improve. But it is predominantly a message of expectations and support that we want to deliver,” she said. She further stated that she was extremely satisfied with the dialogue she has had with Ethiopian officials and is convinced that the second phase of development that is being advocated in the country will actually deliver good results.
In her meeting with Economic Commission for Africa’s Executive Secretary Vera Songwe, Lagarde stated that the demographic phenomenon on the continent needs to be monitored and dealt with.
“High single digit growth rate which are short of delivering on per capita basis, given the demographic phenomenon, are observed in some countries. Regrettably there are quite a few countries on the African continent that are not growing at those rates, there are 17 of them actually which are in per capita basis, are seeing income go down and not go up.”
“So while we are saying the sun is shining on the global economy, there are too many countries that are left behind on per capita basis. We clearly have to address their particular concerns and their particular fundamentals to see how we can all help. Move them to a better, more sustainable more inclusive growth going forward,” Lagarde said.
On her part Vera Songwe also underlined the need to focus more on demographics on the continent. “I think when a big institution like ours meet, it is important that we look at what are the innovative solutions that we can bring to the continent. The question of demographics has been a big one; it continues to be a big one.”
“For a long time we have talked about the demographic dividend, now we are asking ourselves do we have a dividend or are we going into a demographic trap which basically means we look at GDP per capita, look at issues of inequality and so on. But even though countries grow at 7 to 8 percent which we celebrated for the last two decades, with the rate of population growth, we probably need to be doing 15 percent to be able to see substantial increases in GDP per capita,” Songwe said.
She also underlined that to achieve the above, one of the innovative things that can be done is to bring institutions such as the ECA and IMF together to work on new models of growth for the continent.