Precise Consult, an Ethiopian management consulting firm is announced that it has completed and published various studies on Ethiopian Agriculture, Health and Finance sectors. The studies have covered key policy and regulatory barriers impeding sectoral transformations and private sector participation, lessons from other countries, and policy or regulatory recommendations.
The specific study areas are Agricultural Financing, Quality Control Systems and Regulatory Gaps in Ethiopian Agricultural Export Commodities, Access to Credit for MSEs and Credit Information System, Digitization of Government to People and People to Government Payment System & Interoperability, Medical Office Practices, as well as Digital Health.
For busy readers, policy briefs are extracted from the studies succinctly summarizing the key findings and policy recommendations primarily targeting policy makers at government, andadvocators in business associations and other civic societies. Position papers are also prepared defending our position in the study areas.
Precise Consult publishes various studies on agriculture, health and financial sector in Ethiopia
COVID 19 and New Economic Trend
One of the very few good things about the COVID 19 pandemic is when it happened. Just imagine it had it struck two decades ago, when the Internet was still at an early stage. Staying at home would have felt a lot lonelier. People are relying on the Internet to help them cope with the pandemic, but of course it is only part of the story. Shifts in work patterns, convenience factors, traffic and congestion management as well as future episodes of enforced confinement will further accelerate the existing trend toward cyberspace.
Almost everyone in America and Europe are now shops online, banks by using banking apps and pays bills electronically. Even those of us who resisted the Internet before have succumbed to it during the pandemic. Currently, Ethiopia also reportedly technologically well equipped to launch electronic transaction. This was indicated on 6 May 2020 when the Minister of Innovation and Technology, Dr. Abraham Belaya discussed the electronic transaction draft bill with human resource and technology standing committee of the House of Peoples Representatives (HPR).
With the same token, distance learning has finally taken hold. Distance learning has also become a necessity for many millions of school kids and college students around the world. Now that its potential is more obvious, it will be more accepted in the future. Here again, several schools are struggling to get their pupil engaged electronically. Alexei Bayer, a Senior Economist based in New York stressed that demand-side pressure will inevitably lead to significant supply-side improvements. No change is behaviorally more significant than teachers now thinking in a dual mode, about the physical and the digital classrooms.
Alexei Bayer noted that people who only worked at the office before the pandemic are likely to spend at least some time telecommuting after it is over. And the shift to teleconferences will be permanent, largely replacing business travel. Watching movies, theater productions and concert performances from the comfort of one’s own home is definitely on the upswing. The prospect of sitting in a confined, crowded space for a couple of hours suddenly seems so yesterday. This will have implications not just for airlines, but also for hotels, expense account restaurants, concert halls and theaters alike. The real question here is, after COVID 19, will they ever be back?
Ashutosh Sheshabalaya, CEO of SolvX, a global security services and research firm stated that all of which leads us to a new source of significant worry: Computers are also very susceptible to infections by viruses. That computer viruses infect computers and can spread around the Internet has long been known. The potential for mischief, or just mishaps, is increasing significantly in the age of the coronavirus.
According to Ashutosh Sheshabalaya, the parallels are astonishing. Like the novel virus SARS-COV-2, which invades living cells forcing them to produce copies of the virus, malignant computer programs force infected computers to do their bidding. And while we may have found protection against “old” computer viruses, the race for new, even more destructive computer viruses is always on. There have been several viruses attacking computers around the world that have been quite scary. So far, cyber security firms, which often hire those who used to create viruses themselves, have been able to deal with those viruses fairly successfully.
But viruses are becoming more sophisticated, aided by artificial intelligence and machine learning. There is a clear and always present danger that an equivalent of the current coronavirus will paralyze our computer networks and systems and force us to shelter in smaller networks – or even to leave the Internet entirely. Cybercrime has been rampant. Much of it, whether to steal people’s identity, to empty bank accounts or to lock up systems and demand ransom, operates as a for-profit business.
Holger Schmieding, Chief Economist at Berenberg Bank in London predict that an estimate puts damage from cybercrime at 6 trillion dollar by next year, up a staggering ten times from 600 billion dollar in 2017. No wonder that cybercrime has already been called a pandemic and one of the greatest challenges facing the world. Industrial spying is also a big business. Even though companies try hard to shield themselves from it, effective protection is hard to come by. The human slippage factor is very large.
Governments are trying to combat all those malicious activities but with very limited success, especially since they themselves are likely to engage in hacking, spying and cyber warfare, which involves designing and spreading malware. The United States and Israeli governments have been engaged in sabotaging Iran for years, using all kinds of sophisticated cyber weaponry. According to Holger Schmieding, some of the worst malware was allegedly designed by those countries’ secret services. Worse, national cyber warriors are believed to have deadly weapons at their disposal, ones that can disable the adversary’s power grids or damage nuclear plants. On the other hand, when it comes to identifying cyber criminals, even technologically advanced governments seem impotent, or at least they are losing the war.
To conclude, as with the coronavirus, the more crowded we become on the Internet, and the more interactions with strangers we become party to, the greater the danger of a serious infection. Potentially, this threat rises to the point when doubt could be cast on the very future of the Internet.
Ethiopians unite over GERD
By Maya Demissie
Ethiopians show their solidarity as the UN Security Council convene for an in-person briefing on an ongoing disagreement involving Egypt, Ethiopia and Sudan regarding the Grand Ethiopian Renaissance Dam. The Ethiopians unity comes in the wake of the second filling of the GERD earlier this week despite the crisis in Tigray.
An agreement on the dam can be reached, and must be reached, the United Nations emphasizes while underlining the UN’s readiness to support the countries and the African Union, in reaching an agreement that is beneficial to all sides.
Meanwhile, tensions over the Great Ethiopian Renaissance Dam (GERD) intensify after United Nations Security Council (UNSC) meeting on Thursday, July 8.
The GERD is projected to be the largest dam in Africa when completed. Egypt and Sudan say the dam would restrict their water access and endanger their citizens, while Ethiopia argues the dam could lift millions of its own citizens out of poverty and food insecurity without affecting the downstream countries.
The ten-year conflict has endured multiple attempts at negotiations and international pressure from the United States, Saudi Arabia, and the African Union (AU), among many others.
Egypt and Sudan announced Tuesday they received notice from Ethiopia that it begun the second phase of filling the GERD reservoir.
The Egyptian Irrigation Ministry emphasized its “firm rejection of this unilateral measure,” and labeled the move “a violation of international laws and norms,” in a statement released Monday, July 5. Sudan’s Foreign Ministry described the action as a “risk and imminent threat.”
Ethiopia insists that adding water to the reservoir during the rainy season, with high risks of flooding, is a natural part of the construction process and impossible to postpone. Egyptian Irrigation Ministry spokesman Mohamed Ghanim told a local news station that the volume of water in the reservoir would depend on the rainfall in Ethiopia, and that effects on the Nile won’t be visible for at least a month.
The matter was discussed at the UNSC meeting, requested by Tunisia on Egypt and Sudan’s behalf. However, the council announced that it can only “encourage all sides to get back to negotiations,” according to France’s ambassador to the UN.
At the meeting, the UNSC members supported AU negotiation efforts and urged all parties to continue talks. Ethiopia has previously rejected international involvement in favor of AU-led mediations, and Ethiopia’s Minister of Water described UNSC involvement as “regrettable,” urging Egypt and Sudan to continue talks without outside influence.
Tunisia submitted a draft resolution urging Ethiopia to stop filling the reservoir, endorsed by Egypt and Sudan’s Foreign Ministers. The text calls on the nations involved to finalize an agreement in six months.
Egypt and Sudan have been urging Ethiopia to sign a binding deal regarding the filling and operations of the dam. Previously, Ethiopia had stated it will continue the second stage of filling with or without a deal.
Original agreements on the division of Nile control were formed on the basis of colonial-era treaties brokered by Britain. The agreement gave the equivalent of 66 percent of the river to Egypt, 22 percent to Sudan, and 0 percent to Ethiopia. 12 percent is lost to evaporation whilst Ethiopia was not consulted.
Many Ethiopians see the continent-wide record set by the GERD as a symbol of national pride.
With conflicts in Tigray, GERD is noted to act as a ‘unifying factor’ for Ethiopians in a time of crisis.
Demystifying HGERA’s progress report
On its Home Grown Economic Reform Agenda (HGERA) progress report, the Ministry of Finance (MoF) average parallel market has shown reduction in the 2019/20 budget year; while it reveals that under medium-term debt management strategy (MTDS) it will introduce a cost-risk trade-off for composition of the government debt portfolio.
The report that evaluates the first year of HGERA that is during the 2019/20 budget year indicates that the country has got USD 2.5 billion worth of debt restructure. It further added that the government is looking for more debt restructuring that is worth over USD 1 billion.
The report that was issued mid this week stated that MTDS is currently under preparation and aims to revise the composition of the government debt portfolio through a cost-risk trade-off.
“The new MTDS will also incorporate a mechanism to manage the debt of SOEs, which provides a broader picture of the public sector’s debt portfolio and debt sustainability strategy. This is expected to be launched by the end of the 2020/21 fiscal year,” it added. The 2020/21 fiscal year ends on Wednesday July 7.
According to the report, the existing debt directives are under review to employ a more rules-based mechanism for contracting and guaranteeing public debt, and the consolidation of oversight over public debt.
Since the coming of Abiy Ahmed as a premier his major task in related with the country debt burden was that lobbying foreign partners to ease the repayment of the country that was due.
Regarding the debt restructure, MoF said that USD 2.5bn in principal and interest payment has been postponed for five years by commercial creditors under the first external debt restructuring scheme.
“Negotiations are underway with creditors for the second external debt restructuring or re-profiling scheme, with an expected restructuring of more than a billion USD. The restructuring is expected to provide up to a six years grace period and ten years of maturity extension,” it added.
Besides the debt restructure aligned with direct negotiation, the country has been one of the eligible countries that got some official debt restructuring in connection with the presser of COVID 19 on the economy.
Under the G20’s Debt Service Suspension Initiative (DSSI) Ethiopia has benefited debt service suspension of close to USD 125 million.
MoF evaluation report indicated that measures to improve the country’s risk of debt distress from ‘high’ to ‘moderate’ were successfully implemented, “concessional loans were limited to ongoing projects, where the share of non-concessional loans to total loans decreased from 46 percent to 13 of total loans disbursed.”
At the end of the 2019/20 fiscal year total external debt stock decreased to 25 percent, from 28.1 in the preceding year. Similarly, domestic debt stock decreased to 24 percent of GDP, from 29 percent.
The restructuring has also included the domestic loans, “domestic central government debts have also been restructured by converting short-term bills to long-term notes and bonds.”
It explained that 192 billion birr NBE direct advance amount was restructured by converting the 15-year bond/ repayment period with a 10 year grace period, “149.3 billion birr old treasury bills were converted into long-term treasury notes. This arrangement improves the lending terms for the domestic creditors as well as lessens the immediate debt service burden on the government.”
Regarding direct advance it said it was notably minimized. The NBE net direct advance to the budget was maintained at 15.6 billion birr, showing a 61 percent decrease from the previous fiscal year.
The volume of disbursement from non-concessional sources decreased to USD 760 million in the reported period. The total share of non-concessional loans to total loans decreased by 18 percentage points – from 46 in 2018/19 fiscal year to 28 percent of total disbursements.
It added that the economy showed strong resilience during the past fiscal year in the face of the global economic downturn due to the COVID-19 pandemic. Growth was kept at 6 percent. The agricultural sector especially showed remarkable growth as it grew at 4.3%, while manufacturing and service sectors showed a slight negative trend after the second half of the fiscal year, when COVID 19 occurred. In the reported year exports showed a 12 percent increase after close to a decade of stagnant performance, while the foreign exchange reserves improved to USD 3.1 billion covering 2.5 months of imports.
As another success, MoF show that financing of the budget was managed through improved tax revenue mobilization, concessionary external finances, and raising funds from local markets, “tax mobilization increased by 16 percent, the budget deficit was maintained at 2.8 percent,” the report underlined.
It indicated that judicious monetary policy was pursued with contractions in broad money growth (maintained at 17 percent), along with notable improvement in the financial sector. A savings growth of 16 percent was achieved, while credits were expanded by 14 percent.
“Gradual measures are underway towards a market-based exchange rate regime, along with measures to improve and diversify sources of forex,” it said by adding that the average parallel market premium was reduced by 8 percentage points from June 2019.
The evaluation report of HGERA argued that private sector access to finance showed a positive trend, with fundamental changes undertaken to remove financial repression including the removal of the 27 percent bill and improvements in the financing of SOEs.
The private sector’s access to new credit increased by 20 percent – accounting for 64 percent of total credits in the fiscal year. The institutional frameworks for the establishment of capital markets are being finalized, which is expected to further boost the availability of finance in the economy.
