By Tinishu Solomon
The International Monetary Fund (IMF) has once again urged Ethiopia to shift its public sector-led growth strategy to a private investment-led model in order to sustain its economic growth in the long run.
After a fifteen-day long stay in Addis Ababa and several talks with high ranking officials of the government, IMF’s team says, in its assessment released on Friday, the current model has delivered rapid and broad-based growth over many years.
“The outlook for Ethiopia remains highly favourable, reflecting its significant economic potential and productivity-enhancing investments and reforms,” said Richter Hume, who led IMF’s team to Addis Ababa.
But Hume said Ethiopia needs to build a strong private sector in order to sustain its economic growth, which has so far been driven in large part by public investment.
“To sustain rapid and inclusive growth over the coming years, the private sector will need to play an increasing role as a driver of growth,” said Hume.
Boosting domestic and foreign resource mobilisation, and reducing bottlenecks to doing business were identified as two key factors to sustain the growth over the medium term.
“These should allow for a growing role for the private sector, which holds the key to job-rich growth going forward,” said Hume.
The IMF said it sees Ethiopia’s economic performance this year as strong due to solid performance in agriculture and robust public investment in infrastructure, despite reduced export performance.
Ethiopia’s exports were hit by low commodity prices and the impact of the Ebola virus on travel receipts.
IMF projects Ethiopia’s real GDP to growth to be 8.7 per cent for fiscal year 2014/15, easing to 8 per cent in 2015/16.
Inflation remains contained and has remained in single digits, which Hume said was an important achievement for macroeconomic stability for the economy.
The fund, however, said the current food price were pushing inflation close to 10 per cent.
Hume’s team recommended “a continued cautious monetary policy stance, with particular attention paid to core inflation”.
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