External imbalances
and inadequate reserve buffers remain key risks to Ethiopia's economy,
warn the Board of Directors of the International Monetary Fund (IMF).
IMF's Board met
earlier this week for a country consultations on Ethiopia, following a
report it received from a mission that has visited the country back in
mid-September 2017.
The Board has given the nod to the conclusions of
the mission led by Julio Escolano, which praised Ethiopian authorities
for the expansion of the economy by nine percent last year and a prudent
fiscal policy that keeps budget deficit lower than had been expected.
However, the budget deficit has picked up to 3.5pc of the GDP, above the
threshold set economies in the Eurozone.
Sharing Escolano
mission's projection of robust growth next year, 8.5pc, the IMF warns
the economy is confronted with the threats of "externals imbalance" that
brought the nation's foreign exchange reserves down to 3.2 billion
dollars in 2016/17, enough only to cover 1.8-month worth of imports. It
also reckoned that the economy, believed to be at a crossroads, is not
out of the woods when it comes to inflation, thus urged Ethiopia to
tighten its monitory policies.
The Board says
Ethiopian authorities need to continue with policy measures to reduce
external imbalances (foreign debt), check on imports, diversify exports
and introduce flexible exchange rate policy. The Board has urged
Ethiopian policymakers to push for policy reforms aiming at containing
public sector borrowing while broadening the space for private sector
competitiveness, including further privatisation of the nation's
valuable assets.
Describing the role
the state-owned Development Bank of Ethiopia's (DBE) lending mechanism
as "distortive," the Board insisted authorities need to monitor its
mounting non-performing loans closely.
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