Ethiopia fights for vibrancy as economy takes Covid hit

Saturday May 16 2020

Breathing apparatus brought from different countries, delivered to Ethiopian Health Ministry. PHOTO | ANADOLU AGENCY via AFP


For the past three years, Ethiopia was the talk of town, with leading institutions terming it one of Africa’s fastest rising economies.

Then Covid-19 pandemic happened and the conversation changed. By May 14, Africa’s second most populous nation of 110 million had registered 263 cases, 108 recoveries and five deaths.

A poor health system saw Prime Minister Abiy Ahmed make a public appeal on debt, arguing his country was juggling between repaying loans and attending to the sick.

“The dilemma Ethiopia faces is stark: Do we continue to pay toward debt or redirect resources to save lives and livelihoods?” he posed in an opinion in the New York Times last month.

Ethiopia is not alone. According to situational report by the United Nations Economic Commission for Africa’s (UNECA), the economic growth in Africa as a whole and Eastern Africa in particular will be negatively impacted by Coronavirus.

Experts think the Ethiopian economy has structural vulnerabilities, coming from its agricultural mainstay, low productivity, high unemployment, static export, high trade deficit, high current account deficit and high inflation.



“This pandemic is adding more burden on an economy already pressured with multiple challenges. In comparison, the service sector will be affected hugely,” Getachew Teklemariam, an economic analyst in Addis Ababa told The EastAfrican.

Getachew says the agriculture will be insulated from the pandemic, as Ethiopia’s agriculture sector is subsistence and operated on small family farms.

Domestic Economic reforms made before the outbreak need to be revised in a bid to reduce economic implications from Covid-19, says Getachew.

He further argues that the programme has to be reviewed in its line of surrendering all State-Owned Enterprise through privatisation.

The Ethiopian Economic Association in its preliminary projections recently said that Ethiopia’s GDP will drop by 10 per cent if the pandemic persists for at least for six months.

The UNECA estimates that Covid-19 will “shave 2.9 percentage points off this fiscal year’s economic growth in Ethiopia”.

As response, experts from the Ethiopia Economics Association say commercial banks need to reschedule loan repayments and write off interest payments for severely affected sectors until the shock is abated.

The National Bank of Ethiopia, the Association suggests, needs to consider reserve rate relaxation to enhance banking liquidity and discuss reducing interest rates to stimulate the economy. They also stressed a need for banks to discuss with financial institutions to support exporters by increasing foreign trade credits and deferring loan payments.