By our staff reporter

Ethiopia strongly sets its sight to become a member of the World Trade Organization (WTO). A new national committee gets established by the Prime Minister to spur negotiations.  

The committee which is headed by Gebremeskel Chala, the Minister of Trade and Regional Integration, in consensus noted that the nation has been engaged in negotiations with WTO member nations for four rounds now.

As highlighted, the procedure was put on hold for around three years stemming from several issues, with COVID-19 being the primary concern.

The committee disclosed that questions concerning the negotiation process have been submitted by the US, UK, China, Indonesia, Thailand, and other nations.

 “In the four round negotiation processes, about 900 questions have been tabled and we have given our response during the four negotiations,” the Committee expounded through its head.

According to Gebremeskel, after the fourth negotiation, members voiced over 181 issues, most of which centered on creating a competitive and favorable environment for imported goods alongside locally produced goods.

“The government’s stance on the customs levy is relevant here, they want to see predictable policy regarding our customs duty,” Gebremeskel stated.

“We have now completed the study in preparation for the forthcoming fifth negotiation on those matters,” revealed Gebremeskel, who is also a chief negotiator in the process.

According to the Minister, the national committee is preparing the offer for product imports and is now examining the research.

As he described, a decision was made at the most recent meeting in Geneva in July to wrap up the accession process in three years, and “the government is also working to conclude in the timeframe.”

“The government will work aggressively to join the WTO within three years, and all stakeholders, including the private sector, should be aware of this,” he stated.

One of the economic changes implemented by the present administration, which came to power around five years ago, was to reintroduce the longstanding negotiations and admit the nation as a member of the largest platform.

Ethiopia restarted negotiations in 2020 with the goal of finishing the process by 2021, however unanticipated problems caused the process to be postponed.

Nevertheless, the nation participated in the WTO as an observer for around 20 years, but it was unable to become a member since it could not match the demands of the other nations.

One of the main issues that member nations brought up was Ethiopia’s response to liberalization of the finance and telecommunications sectors.

The government has opened up the aforementioned two sectors on its own initiative, despite the process having been put on hold for the previous three years.

About 29 years ago, 125 nations founded the WTO with the intention of accelerating commerce and the global economy. There are 164 members as of now.

The primary goal of the intergovernmental World Trade Organization is to guarantee unhindered and unrestricted international commerce between states.

Local laws of a nation that is a member of the WTO are not allowed to conflict with WTO rules and regulations.

In addition, the WTO acts as a mediator, giving member nations a forum to discuss and settle trade disputes when they emerge.

Approximately 96.4 percent of global commerce is presently governed by WTO rules and regulations.

By Muluken Yewondwossen

Due to an unusual decrease, the quantity of currency outside banks (COB) has set yet another record in a single fiscal year from its all-time high.

The COB, often referred to as money with the public, decreased in the fourth quarter of the previous fiscal year, which ended on June 30, 2023, as compared to the preceding quarter.

This is the second instance in the same fiscal year and the second after the demonetization of notes in 2020.

Several tools have been put in place by the government to reduce one of the world’s highest rate of inflation.

Reducing the amount of money in circulation within the economy is one of the main macroeconomic tools used by specialists to stabilize the market.

The COB stood at 254.3 billion birr, which contracted by 1.6 percent from its all-time high of the third quarter of the same fiscal year, despite increasing by 22.1 percent from the same quarter of the 2022/23 fiscal year, according to the National Bank of Ethiopia’s (NBE) most recent economic review, which evaluated the situation in the fourth quarter of the 2022/23 fiscal year.

The COB was recorded at 258.3 billion birr in the third quarter of the 2022/23 fiscal year.

According to the NBE 2022/23 1st Q assessment, the COB decreased by 2.2 percent over the specified time, standing at 169.5 billion birr, in comparison to the previous quarter, or the 4th Q of the 2021/22 fiscal year. But the second and third quarters have witnessed significant increases.

The second and third quarters’ COBs climbed by 18.6% and 9.5 percent, respectively, compared to the previous quarters, according to the NBE review. When the government began the note demonetization in the first quarter of the 2020/21 fiscal year, the COB was just 64.6 billion birr, a severe decrease of 29.3 percent from the 109 billion birr of the fourth quarter of the 2019/20 fiscal year.

To achieve 108 billion birr, or a 67.5 percent increase over the first quarter, it has, nonetheless, nearly equaled the previous peak position in the second quarter of the same fiscal year.

Mamo E. Mihretu, the governor of NBE, met with representatives of the financial industry for the first time since taking office around a year ago, he said that during the first half of the fiscal year 2022/23 that ended on December 31, 2022, COB climbed by 27 percent to reach 189 billion birr.

He went on to say that this statistic illustrates the abundance of resources available in the market for financial institutions to deploy as deposits.

In his most recent interview with the state-run media, ETV, Mamo stated that although it is assumed that currency with public will be high because the majority of the population lives in rural areas, there has been no increase over the previous five years relative to the rise in deposits.

The broad money supply, as reported by NBE, was 2.17 trillion birr at the end of the fourth quarter of 2022/23, with a 26.6 percent annual rise primarily attributable to a 26.6 percent expansion in domestic credit and a 9.2 percent increase in other items net, which countered a 43.7 percent contraction in external asset (net).

The fourth quarter of the previous fiscal year similarly saw a decrease in bank new loan disbursements.

During the review quarter 113.5 billion birr in fresh loans (including CBE’s bond purchase) were disbursed; this was a 34.5 percent or 58.6 billion birr year-over-year reduction while 172.1 billion birr was the fresh loan disbursement in the fourth quarter of the 2021/22 fiscal year.

By Muluken Yewondowssen

The Ministry of Finance (MoF) dismisses concerns of State-owned companies (SOEs), who argue that the draft proclamation on public procurement and property administration compels them to follow the law when making purchases.

According to MoF which has ownership over the proclamation, the law was not emplaced to hurt companies’ operations but rather the idea of the proclamation’s governance of public enterprises is to comply with worldwide standards and practices.

The much awaited declaration that would drastically alter public procurement has been the subject of modification processes for more than three years.

After a flurry of debates owing to concerns made about the law, the new proclamation that would amend the 2009 “Procurement and Property Administration Proclamation 649/2009” was expected to be adopted by the parliament in the current budget year.

In a recent meeting, which was convened by the Standing Committee on Plan, Budget, and Finance Affairs on Wednesday, December 27, representatives of State-Owned Enterprises (SOEs), including those affiliated with Ethiopian Investment Holdings, expressed concerns over the draft proclamation’s potential to significantly affect their operations.

“If the enterprises follow the procurement law, which will be ratified and amended very soon, it would affect their day-to-day operations,” the SOEs reps opined.

Prior to the meeting, representatives of the aforementioned SOEs, Ethiopian Shipping and Logistics and Ethio Telecom, submitted their concerns on a well-reasoned basis.

Based on the specifics of their operations, the representatives conveyed their grievances on the proclamation.

They asserted that there was agreement on the matter at the time of the original draft proclamation, and that the inclusion of SOEs in the text was not specified.

The Public Procurement and Property Authority’s Director General, Haji Ebsa, stated that the proclamation’s primary goal is to make SOEs more profitable, globalized, competitive, fast, and of high quality, “We take into account their goals and demands under the upcoming proclamation.”

Haji reminded that the nation’s procurement system has been degraded on an international scale in accordance with the Public Expenditure and Financial Accountability (PEFA) and the Methodology for Assessing Procurement Systems (MAPS) evaluations of the foreign partners.

“SOEs are public properties that should be governed on the proclamation,” he stated, adding, “But according to the nature of their activities, they would operate on directives they are issued with.”

He emphasized that the MoF is ultimately the higher authority responsible for monitoring and safeguarding public businesses.

“Majority of SOEs require a guarantee from MoF to access credit, and the ministry would be responsible for paying if they fail to settle their loan,” he underscored elaborating that without the guarantee that SOEs would not function outside of the law.

“We recognize that misunderstandings accounts for the majority of the concerns expressed by the SOEs. The idea behind the proclamation is to have solid laws rather than jeopardize the operations of state businesses,” State Minister of MoF Eyob Tekalegn said at the session.

He said that the proclamation contained clauses that would maintain the SOEs’ operations.

According to Habtamu Menesha, MoF’s Legal Advisor, foreign rating agencies have questioned the nation’s procurement system in relation to the PEFA assessment.

“They did contend that our scattered procurement system is not acceptable at the international trend, which is the reason for our rate to stand at C+. Therefore, if the nation has a harmonized legal framework it shall improve on its rate,” Habtamu cited.

The main goal of including SOEs in the proclamation, according to the MoF’s legal advisor, is to make the procurement proclamation acceptable worldwide since, unlike us (Ethiopia), “Other countries have harmonized single legal frameworks.” For SOEs and other budgetary offices, it is not distinct.

In Ethiopia, SOEs have a procurement directive that is endorsed by their board of directors and varies depending on the entity.

The legal expert said the World Bank, among others, gave Ethiopia a very low grade because of this practice.

 “This has its own negative impact in terms of value for money, transparency, accountability, and other internationally accepted measurements,” Habtamu further explained citing that the country’s procurement legal framework is yet to b harmonized.

“Partners have advised us to make the necessary corrections, and we have also determined that it needs to be done since the majority of the SOE’s procurement directives closely resemble the budgetary offices’ procurement law and system,” he continued.

According to him, the threshold is the only distinction that can be seen because SOEs are in charge of managing enormous resources.

 “SOEs can engage in both direct and restricted procurement in addition to open bidding. In all other respects, they are run according to the same rules as other public offices. It can be harmonized as a result,” he affirmed.

The primary goal of the new proclamation, according to authorities and MoF officials, is to regulate SEOs within the law in response to the criticism that the nation faces. The legal procurement framework will be unified and broadly accepted, rather than affecting state-owned enterprises, restricting their operations, or jeopardizing their profitability.

The authorities asserted that the proclamation has provisions that let enterprises use their particular directives, which is issued by their respective governing board to have plenty of room to grow and expand. To this end, Habtamu cited the draft proclamation’s articles 87.3 and 4, which spoke about SOEs having the authority to provide orders for their purchases.

Experts claim that improved ties with foreign allies would result from the nation’s central government adopting a uniform legal framework.

“If our legal system were more unified, lenders, including those that SOEs use would be more willing to lend money,” the legal advisor told Capital.

“This is one of the advantages we would have when the procurement system had a centralized design. The country’s international rating will also improve if we address the issue’s pitfall,” he added.

According to Habtamu, “A stronger procurement system would mean that the nation would receive the most from its partners,” and that, “SOEs would also receive more trust from their partners.”

According to the State Minister, the designed new law “will support them rather than have a negative effect” on the SOEs.