Ethiopia Trusts in the Macroeconomic Reforms to Boost Economy

Ethiopia is undergoing significant macroeconomic reforms under the Minister of Finance, Ahmed Shide. Ethiopia believes that since last July, macroeconomic reforms have shown promising results across various economic indicators. The government aims to stabilize the economy and create a healthy macroeconomic policy.

One significant change is the shift to a market-determined exchange rate. This reform has helped close the gap between the official and parallel foreign exchange markets. Previously, this difference stood at 95.7%. The National Bank of Ethiopia now reports a 152% increase in foreign exchange reserves compared to last year. The government also licensed non-bank foreign exchange bureaus, enhancing market accessibility.

Ethiopia has seen a steady decline in inflation rates. From May 2016 to October 2017, inflation dropped from 23.3% to 16.1%. This decrease reflects the government’s effective policies to stabilize prices for essential goods. Minister Shide expects the economy to grow by 8.4% this fiscal year.

The government of Ethiopia is mindful of low-income communities during these macroeconomic reforms. It has implemented budgetary measures to subsidize essential commodities like fuel and fertilizers. This approach ensures that vulnerable populations do not bear the brunt of economic changes. Additionally, the government established a National Tax Reform Task Force to improve local revenue collection without overburdening citizens.

Despite these positive developments, challenges remain. The birr’s immediate depreciation by 30% raised concerns about rising living costs. Due to this currency adjustment, many businesses reported significant price increases for goods and services. While these reforms are essential for long-term stability, they carry risks that could impact everyday life for many Ethiopians.

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