Ethiopia
- Think Piece on Debt Sustainability Analysis –
A
Cursory Critique & Frontloading Macro-Economic Policy to Stem the Tide of
National Default & Economic Collapse
The
Federal Democratic Republic Of Ethiopia - Staff Report for the 2016
Article IV August 30, 2016 Consultation—Debt Sustainability Analysis
Public Lecture - RL Vol XI No CCC MMXVII
Costantinos
Berhutesfa Costantinos, PhD
Professor of Public Policy & Sustainable Institutional Reforms
Abstract
Ethiopia’s
risk of external debt distress remains moderate, although external vulnerabilities
have increased. Exports underperformed relative to projections, owing to a weak
external environment; and the supply shock from the drought required scaled-up
food imports. Despite strong remittances and curtailed public sector imports of
investment goods, the current account deficit remains high. Reflecting higher
indebtedness and low exports, indicators based on debt-to-exports ratios have
deteriorated and (as in the 2015 DSA) breach one standard threshold in the
baseline. Key considerations in maintaining the moderate rating are investment-based
expansion in re-payment capacity financed by the external borrowing; and
special factors that mitigate the risk of debt/currency distress episodes
including capital controls, the large share of debt with official creditors
with a significant concessional component, virtual absence of tradable debt
instruments, and limited integration in global markets. The main risks are
potential continuation of export underperformance and failure to rein in project-related
imports and refrain from associated new non-concessional borrowing. Should
these risks materialise, debt sustainability prospects would deteriorate
materially? The projected baseline path of total public sector debt-to-GDP
(external plus domestic debt) does not result in additional risks beyond those
discussed for the external debt above. The recommendations augurs on the imperative to restart essential production
activities in agriculture and industry, begin to rebuild the education and
health sectors, support community-based infrastructure, activities and physical
infrastructures. A number of
legislative measures were taken that need to be revised with a view to promote
the private sector investment. Other policy measures that need to be taken in
order for the government to continue with the efforts of restructuring the socio-economic system of the country are
liberalisation of major sectors including finance and managed restructuring of
public sector.
Key words: Ethiopia,
risk, debt sustainability, macroeconomic policy, finance reform,
liberalisation, private sector
Countries that need monies so that they can
provide health care and education and shelter to their people shouldn't have to
repay debts that we knowingly lent to bad regimes long since gone; and all
illegitimate debts - debts lent to these terrible dictators like Saddam
Hussein, like Suharto, like Marcos - must also be cancelled. - Noreena
Hertz
Read here or https://www.academia.edu/37065439/Ethiopia_-_Think_Piece_on_Debt_Sustainability_Analysis_A_Cursory_Critique_RL_Vol_XI_No_CCC_MMXVII.pdf
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