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Potential Macroeconomic Implication of World Bank Decline of USD 2 billion Loan to Ethiopia September 6, 2020

Posted by OromianEconomist in Uncategorized.
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Dábessá Gemelal

During such time as this, when the global economy is at the cross road and that of the LDCs’ economy including of Ethiopia is terribly impacted by multitudes of challenges such as conflicts, displacement, flooding, locust infestation, COVID-19 pandemic and others, the decline by WB to give a lone amounting to USD 2 billion will have multiple economic impacts. Here are some of the potential impacts:- Deteriorates Debt Repayment Capacity: Such soft loan from the WB/IMF/AfDB or similar financial institution usually improves nation’s capacity to pay their commercial debts to such country as China.

The inability to pay own debt will have global level credit worthiness impact;- Slowdown import dependent industrial operation: Ethiopia’s industries are largely import dependent, whereby the largest share of the row materials are imported. Hence, during this time when the country is suffering from foreign currency shortage, the lack of such loan will impact the industries significantly;- Decline in Importation of Essential Item: the country is already overheated by the shortage of foreign exchange to import essential times for domestic consumption.

As a result the price rice during the month of July 2020 has gotten closer to 23%. Hence, absence of loan will aggravate the situation and rate of inflation could further increase;- Challenge in the Completion of Mega projects: The country is said of implementing mega projects such as sugar factories, irrigation schemes, hydro power, infrastructural development and many other. Such projects heavily rely on loan from the big global financial institutions. The WB’s decline of this loan would then mean a big challenge for the country to progress in the implementation of this mega projects- Challenge to Maintain Sufficient National Reserve: in the absence of sufficient and affordable loans, the country might resort to the depletion of its national reserve to meet critical demands.

Whereas, the country’s national reserve is already at lower level, which barely covers 2.5 months need of the country;- Challenge to Attract FDI: in country where there is liquidity crunch in terms of foreign currency, the probability for FDI to comer to the country is very low. That is because the investors need sufficient foreign current for importation as well as maintaining portion of their earning oversea.

These are few of the macroeconomic impacts of the current WB’s decline of the $2 billion. As such, the impact will be on all sectors and also on individual to the national economy.

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Awol Kassim Allo

The political and economic costs of pursuing political opponents through the courts are far greater than the benefits**************************************************************

It has been more than two months since Jawar Mohammed and several other leading members of the Oromo opposition were detained based on bogus accusations. More than two months after the high profile arrests, the govt is yet to bring formal charges against them bc it as no case that serves the gov’t political agenda while also meeting the requirements of criminal law. The three people formally charged thus far – Dajanee Xaafaa, Mastawardii Tamam, and Mishaa Cirrii – were charged for a crime unrelated to the events used as a justification for the arrests.Weaponising the justice system to pursue political adversaries is is politically counter-productive and economically ruinous. Over the last two months, there have been anti-Abiy rallies in major cities across Europe, the USA, Canada and Australia. In Oromia, we have witnessed a groundswell of protests, particularly by Oromo women. These are extremely damaging to the image of the country and a PM that won the Nobel Peace Prize only a year ago. These protests are also economically ruinous both in the short and the long term. Detaining political opponents in a country that is tearing itself apart can only complicate its structural uncertainties and deepens its explosive national and subnational faultlines. Put simply, it would make eventual political settlement impossible.I believe the PM understands that the political and economic risks (costs) of pursuing political opponents through the courts are far greater than its benefits. No reasonable person can believe that the government can lock these individuals behind bars and ensure peace and stability while millions of Oromos are saying: “No Peace without Justice”. The anger that we see on the streets both in Ethiopia and abroad would only grow in scale and magnitude if the government persists with these trials and its anti-democratic move to impose a unilateral political settlement for the country. Abiy Ahmed can and must release all political prisoners and return to dialogue. It is the only way to save Ethiopia from the abyss.

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