Earlier operation of GERD will stimulate real GDP growth in the Eastern Nile basin

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A new study commissioned by the Ethiopian Economics Association reveals that the Grand Ethiopian Renaissance Dam (GERD) has a huge positive impact in the GDP growth for all East African countries.
The report states that the simulation results reveal that GERD operation does stimulate real GDP growth in the Eastern Nile basin (Ethiopia, Sudan and Egypt) if it goes operational in 2024 following a four – year filling period (2020 – 2024).
According to the study, the basin-wide annual gain in real GDP due to GERD operation stands at USD 8.07 billion in 2024 relative to the baseline.
When fully operational, the GERD is expected to generate about 15.7 TWh energy per year. This corresponds to an increase in Ethiopia’s hydropower production by 142.7 percent.
The construction of the GERD will also increase Ethiopia’s capital stock by about 6.3 percent, according to the study.
The study indicated that Sudan is expected to benefit from the GERD operation in many respects. “The GERD is expected to trap much of the silt from the Blue Nile river that would otherwise fill up Sudan’s dams and will increase the existing power generated at Roseires, Sennar and Merowe hydropower plants by about 35.5 percent from 8.5 TWh/year to more than 11.6 TWh/year. This corresponds to an increase in hydropower production of 35.4 percent.”
It added that the GERD is also expected to reduce the negative impacts on agriculture as well as economically valuable infrastructure in Sudan caused by recurrent floods. “In addition to saving lives, it is expected that the GERD will help to prevent more than USD 200 million in annual flood risk damage along more than 1,000 km of the Blue Nile River from the Ethiopia-Sudan Border to Khartoum,” the study that refers different previous scientific papers says adding “flood damage risk will also be avoided in cities like Dongola, located far north of Khartoum that experience recurrent and devastating floods.”
The study indicated that the basin-wide gain in real GDP due to GERD operation is in the order of USD 8.07 billion.
Ethiopia earns a staggering USD 6.79 billon of the total basin-wide gain in real GDP induced by GERD operation while Sudan and Egypt earn USD 1.11 billion and USD 0.17 billion gain in real GDP, respectively, according to the study. “Thus, all the Eastern Nile countries are expected to benefit from GERD operation,” it added.
Yet, the distribution of the benefits is highly skewed with Ethiopia amassing 84 percent of the GDP gain followed remotely by Sudan that gains 14 percent of the benefit. Egypt earns a mere 2 percent of the basin – wide gain in GDP.
“This reveals that the GERD involves no potential economic costs on both Egypt and Sudan. Thus, accounting for engineering estimates of GERD’s impact on HAD power generation, the net economy-wide effect is positive for all countries including Egypt, reflecting a win-win outcome. This underscores the fact that the benefits of the GERD should be seen in the wider basin –wide economic perspective,” the report explained.
It has also added that if the filling is concluded in these four years the Ethiopian economy is expected to grow at the rate of 1.5 percent due to GERD operation and similarly, the economy of Sudan expands by 1.2 percent with GERD operating upstream, mainly due to enhanced capital stock resulting from the GERD induced flood damage reduction.
“Reduced sediment load and hence enhanced power generation in Sudan’s power plants induced by GERD operation would also stimulate economic growth in the Sudan. With benefits in terms of improved water use efficiency, the GERD would further improve economic growth in the Sudan. GERD operation does offer significant benefits for Egypt’s economy in terms of increased water supply due to reduced evaporation loss from the HAD, as well as the opportunity for improving water use efficiency as a result of a more regulated flow of water throughout the year. Overall, the results show that GERD operation would enhance Egypt’s economy to a certain extent (0.04%),” it added.
The welfare effects of the GERD, as measured by the equivalent variation (EV), would be substantial, according to the study document, the total welfare gain in the Eastern Nile countries induced by GERD operation is about USD 9.17 billion.
Ethiopia is expected to benefit a welfare gain of about USD 6.83 billion while the Sudan and Egypt are expected to experience a welfare gain of USD 1.17 billion each.
Thus, all the Eastern Nile countries experience a positive welfare change due to GERD operation, although the distribution is uneven with Ethiopia, Sudan and Egypt earning 74, 13 and 13 percent of the total welfare gain, respectively.
If the filling and operational period is delayed it would have also economic loss for the three countries according to the study.
It said that the effect of the GERD on real GDP in the Eastern Nile economies varies for different filling period of the dam.
“The gain in real GDP of the Eastern Nile basin declines to USD 5.97 billion when GERD operation is delayed by a year (i.e. it becomes operational in 2025). Extending GERD filling period by three and six years would bring its basin – wide economic significance (in terms of contribution to real GDP) down to USD 5.15 billion and USD 4.15 billion, respectively, from USD 8.07 billion gain in basin – wide real GDP expected to be realized if the GERD is filled in four years (2020 – 2024) period,” the study explained.
Ethiopia’s real GDP gain from the GERD is estimated to decline successively from USD 6.79 billion to USD 3.1 billion if GERD operation is delayed from 2024 to 2030 (i.e. delays by six years). The total loss to Ethiopia in terms of foregone real GDP gains due to delays in GERD operation up to 2030 would be USD 24.68 billion. Sudan and Egypt would lose a total real GDP gain of USD 4.47 billion and USD 790 million, respectively, for the same reason.
“Delaying the GERD operation period would also diminish economic growth in the Eastern Nile countries,” it says adding “extending GERD operation by six years to 2030 diminishes GERD induced economic growth in Ethiopia and Sudan to 0.25 and 0.9 percent, respectively, as compared to 1.5 and 1.2 percent economic growth the countries could achieve if the GERD goes operational in 2024.”
Economic growth rate in Egypt would also oscillate between 0.04 and 0.03 percent and remains, on the average, stable at 0.04 percent for all GERD operation periods considered.