Ethiopia needs to rebalance after investment boom – IMF Africa chief

Country has achieved impressive development but vulnerabilities have grown, says Abebe Aemro Selassie
Addis Ababa
Ninaras / Wikimedia

Ethiopia has made “fundamental progress” in developing its economy, but a boom in investment has come with growing imbalances, the International Monetary Fund’s Africa chief said on July 18.

In terms of GDP growth and several other development indicators, Ethiopia has been ahead of most of sub-Saharan Africa, Abebe Aemro Selassie said during remarks in Addis Ababa. Growth averaged 9.5% from 2010–18, compared with 5.9% across a group of similar economies in the region.

Selassie said Ethiopia had transitioned from productivity-led growth in the early 2000s to growth driven by investment in physical capital in the last 10 years. Much of that investment had come from government spending, which in turn pushed up debt levels relative to the rest of the region.

“The scale of borrowing in Ethiopia has been an order of magnitude different,” said Selassie. “This has pushed up debt vulnerability ratios, placing Ethiopia at high risk of debt distress.”

Selassie praised the government for its “effectiveness” in dealing with issues, such as improving healthcare and education. But he urged policy-makers to concentrate on improving the fiscal position and boosting exports, which have been harmed by the strength of the currency.

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