Ethiopia: Supporting Local Economic Reform Through Appropriate Budget Allocation
The FDRE Peoples’ House of Representatives Parliament recently approved Birr 561 billion for the federal government’s 2021/22 fiscal year.
Prior to approval, however, the parliament conducted an in-depth discussion and debate on the draft budget submitted by the Council of Ministers. On this occasion, various ideas were raised by members of parliament. Among the questions forwarded to the Minister of Finance, Ahmed Shide, were the priority sectors to be supported by the budget and from which the budget will be generated.
Responding to questions, the minister said the budget allocation aims to achieve sustainable development, accelerate poverty reduction and encourage job creation. In addition to this, it supports the materialization of local economic reform, modernizes the financial system, improves production and productivity, and enables the country to solve problems encountered in business activities.
With regard to the Minister, the budget will be mainly generated by national sources and the balance will come from foreign loans and grants.
Currently, although the government has strongly resisted, the Western world is trying to subjugate Ethiopia and impose its interests using the government’s punitive measures against the junta in the Tigray region as a pretext.
Asked by members of parliament whether such pressure prevents the country from obtaining loans from multilateral organizations, Ahmed replied that the foreign grant and loan expected from donor countries will be allocated to the realization of ongoing projects started there. has years that are consistent with the donor’s interest. It is not for new projects. He added that the ministry does not face any challenge in carrying out the projects and obtaining the loan and the grant. He said he hoped the government would guarantee the loan.
However, in case of problems, the transfer of the budget to the priority sectors will be considered as a remedy.
When asked whether the government’s use of locally sourced loans is causing inflationary pressure in the market, Ahmed said the government has already prepared a mechanism to close the budget deficit and so may not use loans from local sources. However, in case he is forced to get a loan from local sources, he will not print new currency, he will use the money in circulation which has no impact on inflation.
Local economic reform put a mechanism on budget allocation and one of the approaches covering the government budget is to sell treasury bills in which banks and insurance companies will compete in an open bid and the winner will pay the money. from its own repository.
Ahmed further said that the shortage of commodities seen in the market will be solved by improving production, productivity and supply. To this end, packages are developed to support producers.
However, to address product shortages due to economic sabotage by greedy brokers, the government will take various measures to account for their illegal acts and the Ministry of Trade and Industry as well as the Ministry of Transport are mandated to enforce. the law. . Alongside these, systems will be put in place to encourage fair competition between traders.
As for Ahmed, to alleviate the country’s hard currency shortage, the mechanism to increase the volume of exports was put in place. Agricultural products which have a high demand in the foreign market are identified and cultivated and incentives will be provided to farmers.
To improve service delivery activities in the overseas market, the airline Ethiopian Air, which is a major source of hard currency, will be encouraged to strengthen its pivotal role.
Currently, the volume of foreign trade is increasing and an environment conducive to improving the ability to earn foreign exchange is created.
From this perspective, import substitutions that help save the nation’s scarce resources will be strengthened. The substitution of imported wheat by the lowland irrigation mechanism has already brought tangible results by saving hard currency. Such practices will be maintained on other agricultural products such as edible oil and clothing.
Regarding job creation for the unemployed, Ahmed said the budget aims to create job opportunities for 1.4 million people in the new budget year.
In addition to this, fertile ground is being prepared for the private sector to expand its activities and play a crucial role in job creation.
The money in the budget is allocated phase by phase according to the plans of the projects. Public enterprises institutionalized for profit also play their own role in the job creation agenda. The expansion of irrigated agriculture will be continued and youth employment in this sector is targeted.
Regarding emergency relief, the Minister said that previously the budget came from reserve money, but for the following year it is allocated from the regular budget. In fiscal year 2020/21, Birr 13 billion was allocated for emergency relief.
For the coming fiscal year, however, an additional Birr 8 billion budget is allocated only to IDPs outside of other emergency aid. Previously, money was spent on IDPs while they were in their temporary camps, but in the coming year with the cooperation of partners, the budget is being deployed not only to provide relief in the camps that the IDPs have installed but also to return them to return home and rehabilitate them.
To contain and monitor budget mismanagement based on the Auditor General’s report, managers who abuse their authority will be held accountable for their illegal acts.
In the budget year already started, various measures will be taken to encourage an inclusive financial system that allows embracing the lower income bracket.
In addition, an enabling environment will be created to make the money supply system viable with a very low inflation effect. System also in place which allows for a viable cash management system.
The implementation of the use of movable assets as collateral to secure bank loans attracts many people who previously did not have access to finance and this practice will be reinforced during the budget year already started and in the future. To this end, the number of banks providing such services will be increased, he stressed.
THE ETHIOPIAN HERALD JULY 21/2021