Dents in a Deep State’s Fiscal & Financial Meta Strategy & Public Policy RL Vol XIII No 449 MMXIX

Dents in a Deep State’s

Fiscal & Financial Meta Strategy & Public Policy

Stemming the tide of Macroeconomic Imbalances in Ethiopia

GHBS After Hours Business – lecture

Public Lecture – Respublica Litereria - RL Vol XIII No 449 MMXIX

Costantinos Berhutesfa Costantinos, PhD

Chair, Lem Ethiopia, Environment & Development Society

https://addisababa.academia.edu/CostyCostantinos

Abstract

The IMF main concerns stem from trajectories that threaten Ethiopia’s macroeconomic stability. Indeed, the state still has snags in demarcating its governing and mercantile roles, resulting in significantly tinsel fiscal behaviour, added to the chronic deficit in economic orderliness, tainted by graft and influence peddling. Hence the enquiry augurs on the main causes of macroeconomic instability, the debt distress, shortage of foreign exchange, reduce the impact of roaring inflation that has undermined livelihoods. The statement of the problem points to the fact that as far as economic matters are concerned, in one sense or other, profits are evil, and that the search for profits involves, in one form or another, the exploitation of the rest of society. The idea that market forces could be trusted to bring about a socially desirable outcome is given almost no credibility at all by the Ethiopian elite. The financial sector remains closed, much less developed that has contributed to the current capital crises. The state until recently remains so strongly opposed to liberalisation because the development of a viable domestic sector will be clouded by foreign banks that will also skew credit allocation towards large-scale enterprises and will “cherry pick” the best companies. Ethiopia’s financial sector remains closed. It has no capital market and very limited informal investing in shares of private companies. A series of financial sector reforms has been introduced since 1994, when private banks were allowed to be re-established. However, the large state-owned banks continue to dom­inate the market.

Credit and capital markets are a viable option for financing social and economic development on a sustained basis. These comprise financial institutions, which provide the intermediation processes, facilitate the mobilisation of savings and channelling these into investment. The liquidity provides opportunities for small and big savers to choose to hold their savings in either cash or securities or both. They are vital to foreign direct investment and indirect investment. Given the internationalisation of capital markets, stock exchanges can facilitate debt-equity swaps & other debt conversion schemes. The allocative function is to mobilise limited capital resources among numerous competing alternative uses that can be critical in deter­mining the overall growth of the economy; in effect, providing means for securing funds for com­panies to expand and modernise, accelerate industrialisation and provide liquidity for the investment funds, a measure of confidence in the economy and serve as an important barometer for the economy through price mechanisms. They provide industrial management with some idea of the current cost of capital. This can be important in determining the level and rate of investment; acting as reliable medium for broadening the ownership base of public companies, as small investors have opportunities to invest in privatised enterprises.

Key words: devaluation, inflation, balance of payments, liberalisation, financial institutions, financial interme­diation, credit and capital markets,

see paper here or https://www.academia.edu/38826938/Dents_in_a_Deep_State_s_Fiscal_and_Financial_Meta_Strategy_and_Public_Policy_RL_Vol_XIII_No_449_MMXIX

see presentation here or https://prezi.com/weerpuka2ont/?utm_campaign=share&utm_medium=copy