Poverty to Progress and Distress to Viability: Breakthroughs in Ethiopia

Abstract

Good News in Africa was uncommon. But Ethiopia is harvesting it in the current century in Economic progress, Fiscal viability and Stability among others. The purpose of this study is to assess economic progress and External Public debt in Ethiopia during the recent three planning periods: Sustainable Development and Poverty Reduction program (SDPRP)   Plan for Accelerated and Sustained Development to End Poverty (PASDEP) and the Growth and Transformation Plan (GTP) periods which covers decade of 2003-2013. To this end, secondary data on public debt and other relevant macroeconomic issues of the decade under study were collected, adjusted and collated. Economic progress indicators such as GDP, percapita income, poverty level, unemployment, income inequality and Debt indicators such as Liquidity Monitoring Ratios, Debt Burden Ratio, Present Value Indicators, Debt Structure Indicators, Dynamic Indicators and Fiscal Indicators were collected/ computed and analyzed to measure economic progress and the debt service capacity of the country. The result from descriptive analysis of secondary data over the last 10 years showed that: The country registered uninterrupted and historic economic growth with an average rate of 10.9 percent during the decade. The rate of investment grew to 33 percent. Domestic saving rose to 17.7. Import shares about 28 percent of GDP and per-capita GDP grew to 550 USD, un employment reduced to 17.5, poverty level came down to 26 percent and income in equality to 29 percent. The growth in debt accumulation and debt service cost did not compromise economic growth, equity, employment and poverty reduction. The country’s debt utilization and management capacity significantly increased. External Public debt of Ethiopia is well managed. There is no alarm of debt distress, no significant manifestation of debt crises risk as it has track record in economic growth history and favorable growth potential along with not high present value of external debts outstanding. The 1990’s debt problems are not issue of worry now. The potential of the country to mobilize external debt finances at international level is improved. The country was rated as B and B+ by leading international raters for its credit worthiness. More over the country stayed as an island of stability in very unstable neighborhoods. In the other side, researches about private sector development and policy advise papers show absence of easy access, unavailability and unafordability of finance for private sector and weakness of institutional and policy environment. In this paper, the national policy makers and implementers are advised to work on institutions and infrastructures required to make easy access of finance for private sector and optimum use of debt finance, reducing bureaucracy, complex regulations and improving transparency to attract and retain foreign finance and reduce primary deficit and growth in current expenditure, raise efficiency of borrowing, reforms in debt management to sustain viability and  look for non commercial and concessional external borrowings for present an next GTP financing.

Keywords: Public External Debt, Economic growth, Debt distress, Fiscal Viability.