Abiy Ahmed's 'New Horizon of Hope' strategy,.....
Abiy Ahmed's 'New Horizon of Hope' strategy, to underpin his economic strategy, is only one-page long,
IHS Markit, a #London–based global information provider indicated that #Abiy Ahmed’s new economic program is challenged by foreign-exchange scarcity.
Alisa Strobel, Senior Economist and Chris Suckling (Ph. D.), Senior Analyst – #Sub-Saharan Africa, Country Risk, IHS Markit came up with that conclusion following the newly proposed ‘homegrown economic reform program the Ethiopian government announced in the past recent days, which aims to increase foreign-exchange availability and create a more conducive operating environment for foreign investment,
As to them, investor protections are likely to be strengthened before December 2019, but foreign exchange availability is very unlikely to improve during 2020-2021
IHS Markit revealed that there is a newly created national reform committee that tasked to co-ordinate several measures so as to sustain economic growth and increase foreign investment in #Ethiopia. According to the writers, policy implementation will very likely only advance piecemeal during 2020.
Furthermore, the national reform committee has identified the key economic weaknesses that need to be addressed, nevertheless, no specific policy measures have been introduced, IHS Markit asserted. According to IHS Markit, the national reform committee needs to address the piecemeal progress made on economic reforms by overlapping committees that have been established within the prime minister's office since the new government was appointed in April 2018. Prime Minister Abiy Ahmed's 'New Horizon of Hope' strategy, which underpins the government's economic strategy, according to the writers is only one-page long.
#Foreign-exchange (FX) scarcity is the main impediment to boosting foreign investment in non-agricultural sectors such as construction, manufacturing, and tourism, yet foreign reserves are very likely to remain at less than two months of import cover during 2020-21, with small and medium-sized businesses facing FX delays beyond 90 days on average.
As to IHS Markit, FX scarcity is driven by several factors, including poor non-agricultural export growth. Total export growth during the third quarter of fiscal year 2018/19 declined by 7%, compared with the previous quarter.
#Exports reached USD678.5 million in June 2019, compared with imports at USD3.6 billion during the same month. Foreign investors will face FX delays when importing construction materials, equipment, or inputs into manufacturing processes, and typically depend on risk mitigation measures being agreed in advance with the authorities, such as FX guarantees issued by the national bank of Ethiopia (NBE), IHS Markit accentuated.
The cycle of weak exports and depleted reserves is not likely to be broken by devaluing the currency or transitioning to a flexible exchange rate, given the continued dominance of agricultural exports. Strong political opposition to the resulting inflation pressures indicates that such a policy is, in any case, very unlikely to be considered before the scheduled August 2020 legislative elections, the writers furthered.
Strobel and Suckling recalled that officials have previously discussed liberalizing the managed exchange rate and devaluation of the currency. However, floating the currency's exchange rate, as to them, is very unlikely at this stage, as the Ethiopian People's Revolutionary Democratic Front (EPRDF) coalition, faces grassroots political opposition ahead of the scheduled 2020 elections that would be worsened by any resulting increase in core inflation (already at 10.3% in June 2019), and higher food prices.