Minister of Planning and Development, Fitsum Assefa, has announced a significant reduction in Ethiopia's debt burden over the past six years, attributing this progress to a strategic shift away from commercial borrowing, proactive debt restructuring with creditors, and substantial loan repayments. The Minister emphasized these achievements as a testament to the government's commitment to responsible fiscal management and a diversified economic agenda.
Addressing a press briefing on the outcomes of ongoing macroeconomic reforms, Minister Fitsum revealed that Ethiopia's current debt-to-GDP ratio has decreased to 13.7 percent, a marked improvement from over 30 percent before the initiation of the reforms. This considerable reduction, she explained, reflects a concerted effort to mitigate the country's financial vulnerabilities.
"The government has adopted a multi-faceted economic and social policy vision," stated Fitsum, highlighting the government’s focus on equitable access and an inclusive growth model. She elaborated that the government is pursuing a balanced approach to economic development, actively promoting growth across diverse sectors including agriculture, manufacturing, mining, tourism, and the digital economy, while simultaneously addressing the historical imbalance in economic opportunities.
A cornerstone of Ethiopia’s economic transformation, the Minister asserted, is the government's strategic shift to encourage greater private sector participation. "We are progressively transferring the dominant role the government has historically held in the economy to the private sector, fostering a more dynamic and competitive marketplace," she stated.
Minister Fitsum detailed that the government's initial domestic economic reform policies involved a comprehensive overhaul of existing regulations, with over 80 laws amended, including key legislation governing trade and investment. These reforms, she emphasized, have streamlined processes, enhanced the business environment, and contributed to the country’s digital economy aspirations.
Furthermore, the Minister noted substantial progress in enhancing government revenue collection, implementing more efficient expenditure management practices, improving the effectiveness of research-based project implementation, and ensuring that subsidies are effectively channeled to their intended beneficiaries. She acknowledged that Ethiopia's previous financing model had led to unsustainable levels of debt, and underscored the significant effort undertaken over the past six years to rectify this.
The Minister highlighted the transformative impact of the comprehensive macroeconomic reform package, citing significant improvements in foreign exchange management. Notably, increased revenue and foreign exchange earnings from the gold and coffee export markets have bolstered the national reserves. "We're now witnessing a significant shift, with banks acquiring more foreign currency than they are selling," Fitsum explained. “This, coupled with a 200 percent increase in national deposit rates, speaks volumes to the effectiveness of the reforms. Foreign currency demands from investors are now being met promptly.”
To mitigate any negative impact of the reforms on vulnerable populations, Minister Fitsum announced that the government has allocated at least 400 billion birr for essential expenditures, including salaries, fuel subsidies, medicine, social safety nets, and targeted subsidies to ensure continued access to essential services for low-income citizens.
While the government continues to provide targeted fuel subsidies, Fitsum acknowledged the recent adjustments to fuel prices in response to fluctuations in global oil prices and currency exchange rates. Despite these adjustments, she stated that fuel is currently being sold in Ethiopia at a discount of 20 to 26 birr compared to global market prices.
The government is actively working to enhance the effectiveness of its subsidy programs, the Minister affirmed, emphasizing a commitment to a pro-poor policy. New, digital procedures are currently being implemented to modernize the fuel trading system, bolster efforts to combat smuggling and guarantee that fuel reaches consumers in a timely and transparent manner.
Minister Fitsum reiterated the government's dedication to sustainable economic development, emphasizing the significant progress achieved in debt reduction and the ongoing commitment to prudent fiscal management and inclusive economic growth.