IMF urges Ethiopia to change growth model

Nov 14, 2013

Jan Mikkelsen, the resident representative of the IMF for Ethiopia, urged the government to phase out its policy of forcing private commercial banks to buy bonds issued by the central bank, using 27 per cent of their annual loans and advances.

Jan Mikkelsen, the resident representative of the IMF for Ethiopia, urged the government to phase out its policy of forcing private commercial banks
to buy bonds issued by the central bank, using 27 per cent of their annual loans and advances.


The National Bank of Ethiopia (NBE) issued a directive in March 2011, compelling banks to buy these bonds from the state-owned Development Bank of Ethiopia (DBE), so that national savings could be redirected to finance stated-owned long term infrastructure projects.

Mr Mikkelsen said that this growth model of a state-driven economy has brought positive results in introducing robust growth, while keeping inflation down to single digits, Addis Fortune reports.

But he believes that this growth model chosen by the Ethiopian authorities is not viable
in
the long term as it excludes the private sector. He called on the
Government to change course and "breathe a degree of dynamism" into their macroeconomic activities and improve access to credit.

Ethiopia was ranked 121 out of 144 counties surveyed by the World Economic Forum in its Global Competitiveness Report for 2012-13, which identified access to finance as one of the main
constraints
to Ethiopia's ability to compete in the global market. "The scope for the private sector is grossly constrained," said Mikkelsen.ADNFCR-2976-ID-801660495-ADNFCR