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.

Ethiopia: Food insecurity intensifies despite late Gu and Belg season rainfall (24.05.2017)

Key Messages

• Despite enhanced rainfall at the end of April into early May over many areas of Ethiopia, food security outcomes are still expected to deteriorate, particularly in southern and southeastern pastoral areas due to the late start, erratic, and below-average Gu/Genna rains. In portions of Somali Region, the accelerated loss of livestock has significantly expanded food consumption gaps, and Emergency (IPC Phase 4) outcomes are likely in the absence of sustained assistance during June to September. In lowland areas of SNNPR along the Rift Valley and in East and West Hararghe, southern Tigray, and portions of northern Amhara, projected outcomes are expected to move from Stressed (IPC Phase 2) to Crisis (IPC Phase 3), beginning in June, due to low household purchasing power and a lack of confirmed humanitarian assistance.
• Late Gu/Genna season rainfall has partially rejuvenated water points for both livestock and human consumption across some woredas of Somali Region, and improved water availability has been reported in Borena and Guji zones of Oromia and South Omo in southern SNNPR. However, the rainfall has not continued into mid-May, and the short-term forecast indicates only moderate rainfall as the season concludes. The current marginal improvements in pasture and water are likely to be depleted by early June, which will mean rangeland resources will rapidly decline, and subsequently livestock body conditions and productivity, until the Deyr/Hageya season in October.
• Over most Belg-producing areas of the country, extended dry spells through much of April suppressed the growth of Belg crops as well as Meher long-cycle crops. As a result, even if the Belg rains continue through the end of May, lower yields are likely for maize crops in particular, especially in lowland areas of SNNPR along the Rift Valley. Due to late planting, the green and dry Belg maize harvest in SNNPR is likely to be delayed by more than two months. Poor households are already experiencing constrained food access as they are highly market dependent during the peak of the lean season. Staple food prices, especially for maize, remain atypically higher.
• The 2017 HRD initially estimated that 5.6 million people needed humanitarian assistance through June 2017, but the National Disaster Risk Management Commission (NDRMC) has revised higher the number to 7.81 million. In addition, the NDRMC has projected that in Belg-dependent areas, additional PSNP beneficiaries past the traditional six-month period of transfers will need extended support. The NDRMC, JEOP, and WFP completed the first two distribution rounds, and the third round is underway. However, there are logistical constraints that might impede timely distributions.

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

New drought risks in Ethiopia put recovery at risk (17.01.2017)

FAO targets pastoralists in southern regions facing failed rains on heels of a calamitous El Niño.

ROME, Italy, January 17, 2017 -New drought across swathes of southern Ethiopia may jeopardize the East African nation’s restoration of food security after the worst agricultural seasons in decades unless urgent efforts are made to shore up vulnerable households in rural areas, FAO warned today.

While an impressive government-led humanitarian effort has sharply reduced the number of hungry during the worst drought in 50 years, the legacy of last year’s El Niño along with low rainfall during a critical season pose renewed risks now, especially for pastoral communities facing forage shortfalls and water scarcity in southern regions.

Safeguarding recent gains requires responding to the livelihood-sustaining needs of fragile households that lost or sold livestock and other assets, often adding to family debt burdens to cope with the worst El Niño in modern history.

Effective and timely action has reduced the number of people who will need food aid in 2017 to 5.6 million, down from almost twice as much last August, according to the newly released Humanitarian Requirements Document (HRD). However, food security in 120 woredas (districts) has worsened since July, while 86 woredas are entering their third year (since December 2015) of top-priority emergency status.

The just-approved HRD, jointly developed by the Government of Ethiopia along with UN agencies, non-governmental organizations and other development partners, covers a range of subjects including education, access to water and nutrition. It advises that the bulk of the agriculture sector needs are related to assistance to pastoralists and agropastoralists livestock assistance – a total of $42 million is required by the sector to reach 1.9 million households, mainly in drought-affected southern and southeastern pastoral regions, this year.

Drought strikes again
While northern and western Ethiopia bore the brunt of El Niño, a new drought is emerging in southern and southeastern pastoral areas including Oromia, Somali and Southern Nations, Nationalities and Peoples’ Region (SNNP) after poor, delayed and erratic rains curbed pasture and water availability. Some 80 percent of Ethiopians depend on agriculture and livestock for their livelihoods and an even higher share of the country’s arable land relies on seasonal rainfall.

Below-average precipitation has also affected neighboring Somalia and Kenya. The impact is expected to be most dire in early 2017 among livestock, with unusually early migrations, excess mortality rates and extreme emaciation.

FAO calls for an immediate response to support the food security and nutrition of households reliant on animals. Along with the provision of supplementary animal feed, especially along migratory routes, targeted destocking interventions will be implemented to make protein-rich meat available for vulnerable pastoral communities and support livestock prices in local markets.

Poorly-fed animals reproduce less frequently, lengthening the prospective time required to rebuild herds. For Ethiopian households, restocking after the loss of half of one’s cattle typically takes four years without adverse conditions.

Addressing fragility

Even though FAO’s support will focus on communities depending on livestock, some areas along the Rift Valley, however, especially in the northern and eastern highlands, are facing below-average crop production and therefore receive prioritized agricultural support as recovery will take longer than anticipated.

South Sudan refugees and their hosting communities in Gambella Region, are facing significant food availability and access challenges, and enabling households to produce more of their own food is essential.

After having reached 1.3 million farmers and herders affected by the El Niño-induced drought in 2016, FAO is appealing for $20 million to reach one million farming, agropastoral and pastoral households in 2017, with the aim of protecting gains made last year and preventing vulnerable households from slipping further into food insecurity.

FAO’s programme seeks in particular to support crop production, implement emergency response and resilience activities in the livestock sector, support livelihoods in refugee-hosting areas and strengthen coordination, information and analysis.