Harsh Austerity Measures Implemented in Ethiopia

Harsh Austerity Measures Implemented in Ethiopia
By Peter Heinlein
Addis Ababa

04 June 2009
Ethiopia, already among the poorest countries, has suffered a series of recent economic setbacks, forcing officials to take drastic countermeasures to avoid a financial meltdown. Economic growth projections have been slashed amid shortages of critical items, including foreign exchange, electricity and food.

The roar of generators echoes through the streets of Addis Ababa’s fashionable Bole district. It is another “power out” day, an energy saving scheme that leaves people without electricity for as much as 14 hours, three days a week.

But places like Bole that can afford generators comprise less than half of one percent of Ethiopians.

To shopkeepers without generators, like laundry operator Tewodros Haile, no electricity means little or no profit. He says if this keeps up, he’ll soon be forced to close.

“Business has decreased by at least 50 percent almost,” he said. “Whenever we don’t have the power we have to put our staff, we have to pay overtime. Our expense is increasing because of the overtime. We cannot continue like this.”

The power outages have aggravated Ethiopia’s critical foreign exchange crunch. Exports of coffee, which last year accounted for nearly two-thirds of the country’s $1.5 billion export earnings, are down as much as 40 percent this year.

With hard currency reserves sagging to just enough to cover a few weeks imports earlier this year, the government had exempted major exporting industries from the power cuts. But conditions deteriorated when the hoped-for rains failed, leaving the country’s hydroelectric power plants without water. So the state-owned Ethiopian Electric Power Corporation last month notified exporters they too would face cuts.

The grim outlook is forcing economic planners to dramatically scale back growth projections. Initially, they predicted an increase of as much as 20 percent in export revenues. But in a report to parliament last month, the Trade and Industry Ministry conceded revenues might miss the $2.5 billion target by more than $1 billion.

Tewodros Mekonnen of the Ethiopian Economic Policy Research Institute says that could mean zero export growth this year.

“Since we are a developing country, our exports grow a bit rapidly, so we have exports growing at 18 to 20 percent each year. this year comparing nine months exports … comparing it to last year, the growth is almost zero percent, which is considered serious for us,” said Mekonnen.

Ethiopian President Meles Zenawi (File Photo)
Ethiopian President Meles Zenawi (File)
Prime Minister Meles Zenawi earlier predicted Ethiopia’s economy would grow more than 11 percent this year despite the global economic slowdown. The International Monetary Fund’s projection was a more modest six percent, at most.

Economist Tewodros Mekonnen says the IMF figures look more realistic.

“The economy has been growing 11 percent, and the government is maintaining that 11 percent will continue. but there are some people who say because of the crisis, 11 percent growth is considered a miracle,” said Mekonnen.

For average Ethiopians, the falling growth figures and power outages are just more in a long succession of hardships that have kept their country at the bottom of the world’s development index. For the educated young along Addis Ababa’s Bole Road, like shop clerk Hayat Mohamed, it means scaling back dreams of taking part in the global IT (information technology) revolution.

“At first it was all about we want a faster Internet connection and I wish I could have this and that. But now it has come down to, I wish I could have electricity. We’re just hoping for some improvement,” he said.

In a country where a fewer than 20 percent of the people have electricity, the economic concerns of most Ethiopians are about simpler things, such as food.

The June 1 U.N. Humanitarian Bulletin for Ethiopia suggests food shortages and malnutrition rates may be as bad as last year, when officials clamped a lid on publicity about starving children after some news reports compared conditions to the famine of the mid-1980s.

The U.N World Food Program estimates the national relief program will fall nearly 178,000 metric tons short of assessed needs for the second quarter of the year.

http://www.voanews.com/english/2009-06-04-voa8.cfm

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