No Quick Fix to Ethiopia’s Hard Currency Crisis, Says PM

Abiy’s remarks on Monday were his first substantive public comments on the economy since taking office. According to the latest IMF World Economic Outlook data Ethiopia now has surpassed Ghana as the fastest-growing economy in Africa. But as Reuters reports "foreign investors and local businesses complain that the severe hard currency shortages are stifling the private sector." (Reuters photo)

Reuters

By Aaron Maasho

Ethiopian foreign exchange shortage will last years: new premier

ADDIS ABABA (Reuters) – Ethiopia’s new prime minister said on Monday that a foreign exchange shortage will last for years and more cooperation with the private sector is essential to solve it, state television reported.

Abiy Ahmed, who was sworn in on April 2, addressed the local business community at a session of more than two hours in a hotel in the Ethiopian capital. His paraphrased remarks were later broadcast by state-owned Ethiopian Broadcasting Corporation.

“The crisis with hard currency will not be solved today, nor will it in the next 15 or 20 years. There is an urgent need for more cooperation with the private sector to find a solution,” Abiy was reported as saying, adding that remittances from Ethiopia’s diaspora communities had also fallen for political reasons.

Ethiopia has recorded average annual economic growth of about 10 percent for the past decade, the fastest in Africa. But foreign investors and local businesses complain that the severe hard currency shortages are stifling the private sector.

The International Monetary Fund said in January that Ethiopia’s foreign reserves at the end of the 2016/17 fiscal year stood at $3.2 billion, less than what it spends on imports in two months. The government does not regularly release foreign reserves figures.

The IMF flagged inadequate reserves as a downside risk to economic growth for 2017/18, which it forecast at 8.5 percent.

Despite high economic growth, the landlocked country of 100 million people is heavily dependent on imports. The IMF said export revenues last year were largely unchanged despite volume growth as global agricultural commodity prices remained low and exports from manufacturing, following the start of an industrialization push, are just beginning.

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