ADDIS ABABA – In a major policy shift, Ethiopia's Finance Minister Ahmed Shide has outlined a new macroeconomic strategy aimed at bolstering economic growth while prioritizing the welfare of low-income citizens.
According to Ethiopian News Agency, the policy will be rolled out as part of the comprehensive Homegrown Economic Reform initiative, which has already seen preparation through its first and second phases. The reform aims to transition monetary policy frameworks to market-driven mechanisms, enhancing foreign exchange, financial, and monetary policies alongside public revenue and expenditure management. Shide elaborated that the policy reform would open up wholesale and retail sectors to foreign competition, integrating and coordinating macroeconomic development more effectively.
The reform strategy also targets improving the revenues of public enterprises by bolstering local investors and fostering competitive practices among commercial banks and financial systems. Shide emphasized the importance of coordination with international development partners, including the World Bank and the IMF, to implement these integrated macroeconomic reforms successfully.
Shide revealed that the Homegrown Economic Reform and the National Bank Reform Roadmap have guided policy preparations over the last three years, aiming to allow market forces to determine foreign exchange rates. A significant step mentioned by the Minister was the absorption of 850 to 900 billion Birr in debt from the Commercial Bank of Ethiopia by the Ministry of Finance, which has been instrumental in alleviating financial system strains.
The ongoing support from international financial institutions and donor countries has been crucial in sustaining Ethiopia's economic growth, boosting foreign exchange reserves. The primary aim of these policies, Shide noted, is to stabilize the economy by managing short-term price hikes and foreign exchange fluctuations.
The negotiation of financial aids and reforms prioritizes Ethiopia's interests, with recent agreements securing USD 4.9 billion, significantly reducing the national debt. These funds, according to Shide, will support various social and economic initiatives, including increasing public servants' salaries, implementing safety-net programs, and subsidizing essential commodities like fuel and edible oil.
Shide concluded by highlighting the government's commitment to transparency and structural control in the disbursement of financial support, aiming to alleviate the impact of these reforms on vulnerable populations. A system of financial subsidies for low-income citizens is being prepared under the leadership of Prime Minister Abiy Ahmed, with the coordination of the Office of the Prime Minister, the Civil Service Commission, and the Ministry of Finance. An earmarked budget of 90 to 95 billion Birr will cover these subsidies, while another 100 billion Birr is set aside for fuel subsidies to benefit rural and urban dwellers alike.