Ethiopia's "homegrown reform" initiatives are demonstrating significant effectiveness, propelling both macroeconomic recovery and substantial industrial growth, Prime Minister Abiy Ahmed revealed during his part two interview with the Ethiopian Broadcasting Corporation (EBC). These reforms, he stated, have garnered appreciation and recognition from international partners.
PM Abiy clarified that the macroeconomic reform was not imposed by institutions like the International Monetary Fund (IMF) or the World Bank, but rather stemmed from the country's internal conditions necessitating an open economy. "We researched and took lessons from countries in Africa who have undergone reform like South Sudan, Egypt, and Nigeria," PM Abiy explained, detailing a strategic approach that included sending delegations to learn from these nations' experiences and holding deep discussions with various heads of state and international economic institutions.
The Prime Minister emphasized that Ethiopia's reform agenda, implemented through "Homegrown Economic Reforms 1 and 2," was crafted by integrating these global lessons with Ethiopia's unique economic realities. He highlighted the initial success of Homegrown Economic Reform 1 in mobilizing $10 billion to address critical issues like salary payments. While the IMF initially suggested a $7.5 billion reform package, PM Abiy asserted, "If this reform had simply been copied from the IMF, which has limited knowledge of Ethiopia's specific conditions, it would not have yielded the current results." He added that Ethiopia strongly advocated for a $10.5 billion package to include salary increases, given the large number of low-wage earners.
To secure resources for the second phase of reforms and address various challenges, PM Abiy noted that $3.5 billion was obtained from both the IMF and the World Bank respectively, complemented by debt rescheduling from Ethiopia's creditors. He pointed out that despite these efforts, $10.5 billion remains insufficient given the country's extensive needs, citing a 350 billion Birr government subsidy for fertilizer, fuel, safety nets, and medicine last year alone.
Industrial Surge and Digital Leap
Beyond macroeconomic adjustments, the reforms are visibly fueling industrial expansion. PM Abiy acknowledged Africa's demographic advantage of abundant cheap labor and youth, while also raising questions about how to sustain this benefit amidst the global rise of AI and robotics. He discussed Africa's vast raw material wealth, noting the need for greater value addition – for instance, despite Ethiopia's iron ore reserves, common exports are often scrap metal to countries that don't produce their own iron ore. He also addressed challenges posed by 3D printing reducing industrial scale and existing logistics shortages.
Despite these hurdles, Ethiopia is making tangible progress towards prosperity. Domestic factory output has significantly increased from 47-48% to 60%. Furthermore, since the current administration took office, 10 new industrial parks have been established, bringing the national total to 13. Notably, 80% of the shares in these industrial parks are now operational.
The Lemi cement factory was highlighted as a prime example of this industrial surge, having successfully resolved Ethiopia's cement shortage and now poised for export.1 In the digital realm, Zemen Gebya, a local e-commerce platform, has secured 4 million Birr in sales within just 20 days of its launch, aspiring to become "the Alibaba of Ethiopia." PM Abiy also underscored the dramatic success of mobile money, which has surpassed cash transactions within just three years.
These comprehensive initiatives, PM Abiy explained, are part of a broader, multi-sectoral strategy built upon five identified pillars, aimed at transforming the nation's economic landscape and fostering sustained stability.