Ethiopia: The Economy is struggling, not a rising lion as previously forecasted!

For as long as I can remember there gone stories of the amazing rise of the Ethiopian economy, the financial markets and the outputs out of this world. Where the money would grow ten-folds within minutes of its arrival. Like a mirage the number’s must have appeared in front of our eyes and stories that, we are told over the recent years. The Ethiopian powerhouse and the serious contender with Nigeria and South Africa. With their railways, banks and development projects, the powerful dam and all the others. It must have been a ride for the Ethiopian People’s Revolutionary Democratic Front (EPRDF), Prime Minister Hailemariam Desalgn, must be so proud of his achievement.

Why I say that, because a booming economy does not do this:

“Ethiopia and World Bank have signed a 1.3 billion dollar grant and loan agreement to enhance equitable services and reduce food insecurity. The agreement was signed by Abraham Tekeste (PhD), minister of Finance & Economic Cooperation (MoFEC) and Carolyn Turk, World Bank’s country director for Ethiopia, Sudan, and South Sudan” (All Africa, 2017).

So when a booming economy, that has such magnificent rates and growth prospects should not and no need for extensive borrowings from the World and subsidiaries, to say they need so is a lie. The debt and the international support for projects and food security is not a sign of a sound and strong economy. More of the latter if I beg to differ. On that, alas the recent weeks has proven this. World Bank was ushered in the end of September, but it is now cash-crunch time.

Not the jolly Captain Crunch, but the credit is due.

“Ethiopia will devalue its currency to attract foreign investment and close the gap in foreign trade, President Mulatu Teshome said at the opening of the bicameral parliament on Monday. He said his government is faced with a serious shortage of hard currency and export trade has dwindled in last three years. Mulatu said major projects like the construction of railway and universities will not be carried out this budget year due to a serious shortage of finances” (ESAT, 2017).

The seriousness is there and it is bleak, when the President Teshome shows up and spread enlightenment to the world. That the economy is fragile and not at its peak, is clear when all the prestige and the giant projects are now put on hold until further notice. Clearly, the financial strains have hit the economy, as well as their exports has given them less hard currency.

It does not go well, when just days ago, when this hit the fan as well:

“Double-digit inflation keeps threatening the macroeconomic conditions of the country as the headline inflation rate hit 10.8pc last month, according to the Central Statistical Agency (CSA)- the highest since October 2015. It is in contrary with the target of the government in the second edition of Growth & Transformation Plan (GTP II) to keep inflation in a single digit. The hike in the price of cereals such as teff, maize, wheat, barley, beans and sorghum coupled with holiday-driven price upsurge is the primary reason for the inflationary pressure last month, keeping the food inflation stagnant around 13pc.“As September is a time of multiple holidays, it is believed to influence the increase in the inflation rate,” the report of CSA reads” (Berhane, 2017).

That the cash crunch and the double-digit inflation hits the Republic is not a good look. The proof of the currency value falling, lack of hard currency and new Multi-National loans proves that the Financial Sector and Financial Institutions are strained. There is nothing more to give, it is just bones and not meat. It is just a matter of time before the boiling bones gives no taste to stew as well!

In addition, you the economy is bonkers when their agency spread out this sort of tales, at the time the devalued currency is told to the public on other platforms.

This is from the Ethiopian News Agency:

“The diplomats, who observed the government’s direction at the joint session of the parliaments, whom ENA has talked to also forecasted the country`s economic growth to be amplified in better manner referring the current stability of the nation. Ambassador of Bangladesh to Ethiopia Monirul Islam said the growth that Ethiopia’s economy has witnessed was ‘wonderful’ despite the drought and other problems. “It was 10.9 percent and this year I hope it will be more than that because there is a good rain, everything is good, the state of emergency has been lifted and everything is normal”. “So I think the economy should perform better especially in the agriculture sector as well as in the industry sector”, he pointed out” (ENA, 2017).

I do not know if Ambassador Islam lives in alternative reality or trying to sugarcoat the situation of the dire economic state that the Republic is facing, but it makes good propaganda for the ones who still want the fantastic picture spread around the globe. That the Ethiopian economy is sound and still growing. However, it is hard to grow when you lack currency, you have growing inflation and you are borrowing more funds. I do not know, which economy or financial system that it works splendid in. Certainly not this one.

In addition, the news of the financial rising tiger or lion of Ethiopia has been a mirage, a fraud and play for the world to see. At this stage and in time, it is far from it. The Ethiopian economy is plummeting and at amp speed. If you eat up the crap the ENA serves you, it must certainly serve your kind, but it is not reality. The President even said so, the reports are striking and the added loans proves the dire state.

The ones who is the most hurt. It is the citizens who needs the hard currency to buy food and live, they are punished for the reckless care of the financial system. They are the ones who suffers, because of how the state decided to conduct their affairs. They are the ones who feels the inflation, the rising prices and still has to get by. It is not right, but that is how it is. The Ethiopian government should subsidize and make sure the people get enough. However, do not expect that. This is from the same government that sent Agazi squad to Amhara and Oromia to kill and destroy. They do not care, unless they have too or if it keep them in power. Peace.

Reference:

All Africa – ‘Ethiopia: World Bank Assents U.S.$1.3 Billion Finance to Ethiopia’ (30.09.2017) link: http://allafrica.com/stories/201710090243.html?utm_campaign=allafrica%3Aeditor&utm_medium=social&utm_source=twitter&utm_content=promote%3Aaans%3Aabljpw

Berhane, Samson – ‘Gov’t Sees Double Digit Inflation, Again’ (08.10.2017) link: https://addisfortune.net/articles/govt-sees-double-digit-inflation-again/

ESAT – ‘Ethiopia President Says Country is Broke’ (09.10.2017) link: https://www.tesfanews.net/ethiopias-president-says-country-financial-crisis/

ENA – ‘Diplomats Laud Economic Performance of Ethiopia’ (10.10.2017) link: http://www.ena.gov.et/en/index.php/economy/item/3814-diplomats-laud-economic-performance-of-ethiopia

 

Opinion: The Ethiopian Financial Market is plummeting…

The Ethiopian People’s Republic Defense Force (EPRDF) Prime Minister Hailemariam Desalegn have ordered to fix economic problem the government has. EPRDF has been hailed for their financial growth, but with this sort of news. You know the growth and the reality is far from the truth. Ethiopia News Agency: “International Consultant of Trade, Investment and Economic Development, Dr. Taffere Tesfachew said on the occasion the fact that African countries are performing better than the global average is testimony to how far Africa is coming over the decade. He noted that the economic growth of countries like Ethiopia and Ivory Coast is highly impressive at this time when other African countries are struggling with one or two percent growth” (ENA, 2017).

So I have to question the economic growth, as the Forex Woes and the remittance from the diaspora are proving otherwise. Together with the need of more foreign aid to solve the famine of the drought. So the World Bank clearly knows the troubles of the Ethiopian government since they did this:

“The World Bank today approved a $600 million International Development Association (IDA)* grant to support the Government of Ethiopia’s vision of building a national safety net system to provide effective support in chronically food insecure rural areas, including providing cover during droughts. The Rural Productive Safety Net Project (RPSNP) supports the evolution of the Government’s umbrella Productive Safety Net Program (PSNP) that has been in operation for the last 12 years and is one of the world’s largest safety net programs in the world. Run by the Government, the PSNP pools money from 11 donors, including $600 million of World Bank Group IDA funds. The PSNP provides regular cash or food transfers to 8 million people; currently 4 million of them are in areas affected by the ongoing drought. Its food-for-work component supports public works programs related to landscape restoration, irrigation, and agro-forestry” (World Bank, 2017).

So, when the World Bank gives this as a support of the government. You should take it serious and know the problems of the state. The need of financial support and to make sure drought doesn’t affect the starving citizens. EPRDF are doing badly and now the Forex Companies has to pay of the National Bank of Ethiopia (NBE) for the debt to Enterprise in Djibouti. Look!

Foreign Forex Woes:

“The directive of foreign currency allocation entails all banks must sell foreign currency to a sector whose importance is very high. The banks are required to give priority to payments authorized by the central bank such as foreign loan, supplier’s credits, interest, profit, dividend and excess sales of foreign airlines. Hence, all banks are required to sell the currency collected from importers, although the current direction is high, according to a banker with almost two decades of experience. “Even though I agree with the fact that we shared the responsibilities with CBE,” said one of the vice president of a mid-sized bank. “But requesting such amount of Forex in a short time might lead to crisis.” Yohannes Ayalew (PhD), vice governor and chief economist of the central bank, disagrees. “It is a collective responsibility of all banks whether the call was quick or not,” said Yohannes. “There is no reason to ask CBE to cover all the payments.” The Forex shortage in the country has been haunting the country for years. Prime Minister Hailemariam Desalegn, in his press conference with local media nine months ago, admitted that the Forex crunch would last for the coming two decades” (Addis Fortune, 2017).

NBE Directive to pay of debt to Djibouti:

“National Bank of Ethiopia (NBE) gave order to private banks in Ethiopia to pay the 15 million USD bill the Ethiopian Shipping Logistics Services Enterprise (ESLSE) to Djibouti’s company. The banks are, according to Fortune, given 3 days to sell the foreign currency to the Enterprise. The order is said to have come when the entire country is in short of foreign exchange. The shortage came following the drop in the country’s export performance and remittance earnings. ESLSE owes the money to the port of Djibouti and the central bank gave the order for every bank including the government owned Commercial Bank of Ethiopia (CBE)” (Addis Fortune, 2017).

“Beset by the ever expanding informal channels of remittance, Ethiopia may continue to grapple with shortage of hard currency unless swift and collective measures are put in place, ‘Scaling up Formal Remittance to Ethiopia’ report discloses. A billion dollar transaction takes place via informal channels with 78 percent of the total remittance passing through informal networks in Ethiopia. Some experts believe that the transfer of money through unregulated channels will also likely result in illicit financial flow and dealings. The seizure of 541,659 USD around Harar is a recent indication of informal corridors of hard currency. Informal channels happen to be lophooles for global terrorism and corruption. It will open doors for illegal activities, people may use it to collect huge sums of money for their own dangerous causes, says Ethiopian Financial Security Director General Gemecu Weyema” (Gebrehiwot, 2017).

All of these articles proves the problems of the National Bank of Ethiopia (NBE) and their lacking foreign exchange. This has become a problem as the remittance hasn’t come through the formal channels, as the informal economy are big in Ethiopia. Together with drop of foreign exports that has also hurt the amount of exchange.

Clearly, the government of Ethiopia has a bigger problem that they want to reveal, as the NBE and the Foreign Exchange is plummeting. Therefore, the need at the same time for World Banks loans. Shows the dire situation of the economy. It is not like the Ethiopian News Agency would speak ill of own government and their policies. Since, the propaganda of own growth are more important, than actually telling about the weakness of the economy. This is a reality since the financial policy of Forex Exchange is in favor of the NBE.

This can also make it more profitable to for an informal market, instead of in the open market. The Ethiopian government really needs foreign exchange to pay of debt and use all their means. Instead, they are trying to cover-up their troubles, as they have debt to Enterprise in Djibouti and have troubles with the famine caused by drought. Peace.

Reference:

Addis Fortune – ‘Ethiopian Government Orders Private Banks to Cover ESLSE Forex Needs’ (12.09.2017) link: https://www.ezega.com/News/NewsDetails/4679/Ethiopian-Government-Orders-Private-Banks-to-Cover-ESLSE-Forex-Needs

Addis Fortune – ‘Ethiopia: NBE Ordered Banks to Cover ESLSE’s 15 Million USD Bill’ (13.09.2017) link: http://www.2merkato.com/news/alerts/5220-ethiopia-nbe-ordered-banks-to-cover-eslses-15-million-usd-bill

Ethiopia News Agency – ‘Gov’ts Need to Act Together to Achieve Economic Success: UNCTAD 2017 Report’ (14.09.2017) link: http://www.ena.gov.et/en/index.php/economy/item/3705-gov-ts-need-to-act-together-to-achieve-economic-success-unctad-2017-report

Gebrehiwot, Desta – ‘Ethiopia: Informal Channels Raise Red Flag On Forex Earning’ (14.09.2017) link: http://allafrica.com/stories/201709140729.html

World Bank – ‘World Bank to Help Ethiopia Build a National Safety Net System as a More Effective Response to Droughts’ (14.09.2017) link: http://www.worldbank.org/en/news/press-release/2017/09/14/world-bank-to-help-ethiopia-build-a-national-safety-net-system-as-a-more-effective-response-to-droughts

Drought-stricken herders in Ethiopia need urgent support (11.08.2017)

Pastoralist communities are facing huge losses of livestock.

ROME, Italy, August 11, 2017 – Supporting herders to get back on their feet and preventing further livestock losses and suffering are crucial in drought-hit Ethiopia where hunger has been on the rise this year, warned today the Food and Agriculture Organization of the United Nations (FAO).

Drought has devastated herders’ livelihoods as it exhausted pastures and water sources, leading to a significant number of animals dying or falling ill, particularly in the southern and southeastern regions of the country as other areas recover from previous seasons’ El Niño-induced drought.

Drought-hit pastoralists face reduced milk production, rising malnutrition, and have limited income-earning capacity and severely constrained access to food.

Some 8.5 million people – one in 12 people – are now suffering from hunger; of these, 3.3 million people live in Somali Region.

The current food and nutrition crisis is significantly aggravated by the severe blow to pastoral livelihoods. For livestock-dependent families, the animals can literally mean the difference between life and death, especially for children, pregnant and nursing women for whom milk is a crucial source of nutrition.

With up to 2 million animals lost so far, FAO is focusing on providing emergency livestock support to the most vulnerable pastoralist communities through animal vaccination and treatment, supplementary feed and water, rehabilitating water points, and supporting fodder and feed production.

“It is crucial to provide this support between now and October – when rains are due – to begin the recovery process and prevent further losses of animals. If we don’t act now, hunger and malnutrition will only get worse among pastoral communities,” said Abdoul Karim Bah, FAO Deputy Representative in Ethiopia.

By providing supplementary feed and water for livestock, while at the  same time supporting fodder production, FAO seeks to protect core breeding animals and enable drought-hit families to rebuild their livelihoods. Animal health campaigns will be reinforced to protect animals, particularly before the rains set in, when they are at their weakest and more susceptible to parasites or infectious diseases. FAO-supported destocking and cash-for-work programmes will also provide a crucial source of cash for families.

Funding appeal

FAO urgently requires US$ 20 million between August and December to come to the aid of Ethiopia’s farmers and herders.

FAO has already assisted almost 500,000 drought-hit people in 2017 through a mix of livestock feed provision, destocking and animal health interventions, thanks to the support of the Ethiopia Humanitarian Fund, Switzerland, Spain, Sweden through FAO’s Special Fund for Emergency and Rehabilitation Activities, the United Nations Central Emergency Response Fund, as well as FAO’s own Early Warning Early Action fund and Technical Cooperation Programme.

Somali Special Forces Strike Destroys Alshabab Training Base in Middle Juba (12.06.2017)

MOGADISHU, Somalia, June 12, 2017 -President Mohamed Abdullahi Farmajo’s statement on the dawn strike on Alshabab training base near Sakow.

“Earlier today, I authorized our special forces with the support of our international partners to conduct a strike against an al-Shabaab training camp near Sakow, Middle Juba region. This was a successful strike which destroyed a key al-Shabaab command and supply hub. This will ultimately disrupt the enemy’s ability to conduct new attacks within Somalia.”

“I said when I took office that security will be top priority for my administration. This strike will enhance security and reduce the threats of Alshabab.”

“We have long suffered at the hands of Alshabab which is supported by global terror networks. We and our international partners will take every possible precaution to protect our civilian population from harm during these operations while targeting terrorists.”

“All of us know somebody from our youth, our village, our families, who has been killed or injured by the senseless violence of al-Shabaab. I have personally met the families and the victims of several Alshabab attacks. For those who have suffered under al-Shabaab, and for the rest of Somalia, I want you to know that we are committed to defeating al-Shabaab and uniting our people.”

“To the members of al-Shabaab, I tell you that we are bringing the fight to you. If you, however take advantage of my amnesty offer and denounce violence, we will integrate you into our reform program. You have no future with the terrorists, but you can still be a part of Somalia’s future; a peaceful and prosperous future.”

President Farmaajo: “We will pursue them, and we will defeat Alshabab terrorists” (09.06.2017)

The president has termed the fallen soldiers as the true martyrs, as they died protecting their people and their country.

MOGADISHU, Somalia, June 9, 2017 – President Mohamed Abdullahi Farmaajo has sent his condolences to the families and the people of Puntland following today’s ambush on a military camp in Af-Urur, near Galgala Mountains.

The president has termed the fallen soldiers as the true martyrs, as they died protecting their people and their country.

“We are deeply saddened by the tragic loss of a number of our gallant soldiers in today’s attack in Af-Urur, Puntland. They fought hard and bravely for their country, to keep their people safe during this holy month of Ramadan. We will forever remember them, they are the real martyrs.”

The president assured the citizenry that his administration would not show mercy in dealing with Alshabab terrorists who have no regard for the sanctity of life and the holy month of Ramadan.

“This once again proves that the enemy we are facing is dangerous, is bent on causing harm to the peace loving people of this country and must be fought with by all means. We must show no mercy in dealing with Alshabab.”

President Farmaajo promised Alshabab would be pursued and would pay for today’s attack.

“We promise that Alshabab won’t get away with this. As of now, our troops are in hot pursuit of the enemy; they will pay for today’s attack. I am confident our forces would defeat this abhorrent enemy.”

President Farmaajo spoke on the phone with the president of Puntland and assured him that the Federal Government would stand by the administration and people of the region.

IGAD: Nairobi Declaration on Durable Solutions for Somali Refugees and Reintegration of Returnees in Somalia (25.03.2017)

 

CERF approves $22 million loan to further scale up FAO action to prevent famine in Somalia (21.03.2017)

The funds will allow for increased livelihoods support to rural communities affected by repeated drought.

ROME, Italy, March 21, 2017 -FAO is further scaling up its  activities in drought affected regions of Somalia thanks to a $22 million loan approved this week by the United Nations Central Emergency Response Fund (CERF), which complements the loans already provided by FAO’s Special Fund for Emergency and Rehabilitation Activities.

This effort is part of the international response to prevent another famine in Somalia five years after the previous one devastated the country. FAO’s action aims to increase rural livelihood support and restore food production, while ensuring that families meet their immediate food and water needs.

Across Somalia, 6.2 million people will face acute food insecurity through June 2017. Of these, nearly 3 million people are in Phases 3 (crisis) and 4 (emergency) of the five-phase International Phase Classification for Food Security (IPC). This represents more than a two-fold  increase compared to six months ago. Phase 5 is famine.

The head of the UN’s Office for the Coordination of Humanitarian Affairs (OCHA), Under-Secretary-General and Emergency Relief Coordinator, Stephen O’Brien, said he was releasing the loan from CERF to FAO “as part of the efforts to avert a humanitarian catastrophe in Somalia.”

“More than 2.9 million people are at risk of famine and many will predictably die from hunger if we do not act now. CERF is one of the fastest ways to enable urgent response to people most in need. FAO is a key partner in ensuring that crucial support to livelihoods is reaching affected people. The loan will bridge a crucial gap and allow FAO to immediately save lives and livelihoods of farmers and herders until additional funds from donors are received,” O’Brien said.

“CERF has long been a supporter of FAO’s interventions to save and protect livelihoods and thus lives in crisis contexts. Livelihoods are people’s best defence against famine and this $22 million loan is critical to FAO’s famine prevention and drought response in Somalia, enabling the Organization to provide much-needed, rapid support to vulnerable rural households,” said FAO Deputy Director-General for Programmes, Daniel Gustafson.

Saving livelihoods, saving lives

Most of the 6.2 million people facing  acute food insecurity live in Somalia’s  rural areas where hunger levels have spiked primarily due to losses in crop and livestock production and other sources of food and income caused by repeated droughts.

Early warnings are loud and clear: In a worst-case scenario where the traditionally, main rainy season, the  Gu (April-June), will perform very poorly, purchasing power may further decline to levels seen in 2010/2011, and humanitarian assistance would not be able to reach populations in need, people may  suffer/face famine.

FAO’s work

FAO is scaling up the implementation of its Famine Prevention and Drought Response Plan, which combines lifesaving interventions with emergency livelihood support to address the distinct needs of rural people at risk across Somalia – a twin track approach that provides immediate assistance while offering livelihood support and income opportunities to reduce their dependency on humanitarian aid.

Measures implemented under the Response Plan include providing cash (cash-for-work and unconditional cash transfers), meeting immediate food and water needs; providing agriculture and fisheries based livelihood support in combination with cash (“Cash+”), and saving livestock assets and related food and income.

The loan from CERF complements FAO’s own funding mechanism, the Special Fund for Emergency and Rehabilitation Activities, and will help kick start operations supported by the Governments of the United States of America and the United Kingdom.

Somalia: Declaration of National Disaster (28.02.2017)

The president has appealed to the International Community to urgently respond to the calamity in order to help families and individuals to recover from the effects of the drought disaster to avoid humanitarian tragedy.

MOGADISHU, Somalia, February 28, 2017 -The President of the Federal Republic of Somalia, His Excellency Mohamed Abdullahi Mohamed (Farmajo) has declared a National Disaster to deal with the humanitarian emergency in all areas affected by the current drought.

The president has appealed to the International Community to urgently respond to the calamity in order to help families and individuals to recover from the effects of the drought disaster to avoid humanitarian tragedy.

The president is also kindly calling on the Somali business community and Diaspora to participate in the recovery operations efforts in the affected area with the aim to mitigate the impact of drought nationwide.

The president stands ready to receive a continuous briefing on the assessment and response to the emergency.

Somalia: Drought Emergency Response (27.02.2017)

Ethiopia: La Nina and Indian Ocean Negative Dipole-Induced Drought (13.02.2017)