The National Bank Governor of Ethiopia, armed with IMF-backed recommendations, has declared that the government should refrain from borrowing from its own central bank. This pronouncement, poised to charm the parliament into submission, comes with the shiny allure of “modern economic discipline.” But let’s pause for a moment. Does this shiny allure hold water, or is it just another over-hyped economic myth?

I’ve said it before, and I’ll say it again: the move to make the National Bank of Ethiopia (NBE) “independent” is a poor decision for Ethiopia. Sure, it might look like a responsible, grown-up move in the UK (even there, opinions differ), but imposing this model here is akin to asking grand son to wear a suit tailored for me – completely ill-fitting and absurd!

Let’s get one thing straight: the Ethiopian government is not your average household. Comparing the two is like equating a lion’s roar to a kitten’s meow – fundamentally different in scale and impact. A household relies on income to spend; a government creates its currency. The Ethiopian Birr doesn’t magically appear from the IMF’s vaults or the World Bank’s benevolence. No, it springs to life through the National Bank of Ethiopia, which exists precisely to serve the government’s monetary needs.

This raises the most critical question: why should a sovereign government, which has the unique authority to create its currency, limit itself by borrowing from private entities or lenders at interest?

Is that a trade you, dear reader, would make?

Borrowing in its own currency is not a sign of fiscal irresponsibility – it’s a foundational principle of monetary sovereignty.

Recently, we’re constantly bombarded with doomsday scenarios about national debt. But let’s unpack the numbers. When the Ethiopian government borrows in Birr, what is it really doing? It’s issuing IOUs, yes, but those IOUs sit as deposits in the NBE – a bank that it controls. These so-called “debts” are not liabilities in the same sense as household debt; they’re closer to deposits held at a safe institution.

Think about it: commercial banks stash their money at the NBE for safekeeping, much like you keep your savings at your local bank. The NBE, in turn, allows the government to “borrow” these funds to finance public spending. With this perspective, the national debt is not a forerunner of doom – it’s a savings account where commercial banks park their money and earn modest interest.

Let me ask the government this: has it ever truly struggled to repay the money it has already borrowed? I imagine the answer would go something like: “Struggled? Oh, please. We print the money, remember?

Let me touch upon inflation; ah, inflation – the trusty villain hurried out to frighten anyone questioning the orthodoxy of central bank independence. Yes, excessive money creation can lead to inflation, but Ethiopia is not in a hyperinflationary spiral. The government’s ability to create money is not limitless, but it is grounded in a practical framework: the national budget approved by parliament.

When the government spends, it injects money into the economy, creating demand and spurring growth. Taxes, in turn, are the mechanism to manage inflation by reclaiming excess money from circulation – not to fund government spending, as many mistakenly believe. Imagine if the government taxed every Birr in circulation; the economy would come to a screeching halt.

Taxes, then, are not about funding but about balancing. They prevent the economy from overheating while leaving enough money in circulation to keep the wheels of commerce turning.

Pushing the government to rely on the market for borrowing means shackling public policy to the whims of private financiers. What happens if the market says no? What if interest rates soar? Does the government shut down hospitals, abandon schools, and halt infrastructure projects? This is not fiscal discipline – it’s fiscal absurdity.

By outsourcing its monetary power to private markets, the government essentially becomes a beggar in its own house. A sovereign nation should never find itself at the mercy of the market when it comes to spending in its own currency.

The obsession with central bank independence and constraining government borrowing is a neoliberal relic that Ethiopia cannot afford to import wholesale. Our economic challenges demand bold, pragmatic solutions, not the application of one-size-fits-all models from distant economies with vastly different realities.

So let’s stop the nonsense. The Ethiopian government has the tools it needs to fund its priorities. It doesn’t need to play by the IMF’s rulebook to prove its economic maturity. Sovereign money is a powerful tool – one that, when used responsibly, can build the infrastructure, education, and healthcare systems Ethiopia desperately needs.

Yes, Mr. Prime Minister, why gamble with Ethiopia’s economic future?

The International Monetary Fund (IMF) recently gave Ethiopia a pat on the back, praising its economic reforms and tighter monetary policies. But let’s take a closer look—this isn’t the shiny success story it’s made out to be. In fact, it feels a bit like cheering for a marathon runner who’s barely made it past the first mile and is limping already.

First, the exchange rate gap. Yes, the IMF applauds Ethiopia for narrowing the gap between the official and black-market rates, but let’s not pop the champagne just yet. What’s really happened? The official rate is sliding toward the black-market rate, yet a gap of 12-15% remains. It’s like patching a leaky boat with duct tape—it’s still taking on water. Can this really be considered “fixing” the economy? Businesses struggling to access foreign currency would certainly disagree.

Then there’s the talk about “better management of the economy and improving the business environment.” Seriously? Tell that to the entrepreneurs grappling with inflation, dwindling purchasing power, and red tape that could stretch to the moon. Statements like this might look good on IMF stationery, but they’re not fooling the people living with the consequences.

A particularly troubling aspect of the IMF’s assessment is its praise for Ethiopia’s tight monetary policies. While controlling inflation and reducing central bank borrowing are important, these measures risk pushing the country into austerity at a time when growth is desperately needed. Ethiopia’s economy requires robust public investment, especially in infrastructure and agriculture, to create jobs and reduce poverty. Tight money policies could stifle this growth, further exacerbating economic challenges.

Most glaringly, the IMF fails to address Ethiopia’s ongoing security crises in the Amhara and Oromia regions. These regions are among the most agriculturally productive in the country, yet they are mired in escalating violence and instability. The conflict not only disrupts livelihoods but also undermines the very foundation of economic growth and food security. It is puzzling, if not outright negligent, that the IMF overlooks these significant factors in its analysis.

So, what’s wrong with the IMF? Its approach appears overly focused on technical economic indicators, sidelining the broader socio-political context that directly impacts economic performance. By ignoring the severe security issues and the lived realities of businesses and citizens, the IMF risks promoting policies that may look good on paper but fail to address Ethiopia’s core challenges. A more nuanced, inclusive, and grounded approach is urgently needed to truly support Ethiopia’s recovery and growth.