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Thursday, 17 June 2010 12:21

Final Report On Ethiopian Five-Year Plan

By Zekarias Haddush
ADDIS ABABA, Ethiopia, June 14, (Adis Fortune)
- The Ethiopian economy has been growing for the last four years at an average of 11.8pc, Sufian Ahmed, minister of Finance and Economic Development (MoFED), told members of Parliament while presenting the last five year report on June 3, 2010.


In 2005/06, the per capital income of an average Ethiopian citizen was 164 dollars. This increased by 7.2pc per year to reach 217 dollars by the 2008/09 fiscal year.


If this trend of economic development continues, Ethiopia is expected to join the middle income earning countries of the world by 2025, according to the report.


The agricultural sector was projected to grow at an average of 6.2pc during the five year plan, but by exceeding expectations it has grown at an average of 8.55pc per year for the last four years. Its share of the gross domestic product (GDP) has decreased from 47pc in 2005/06 to 42pc in 2008/09.


Even though the industrial sector was projected to grow at an average of 12pc during the five years, 9.9 pc was the gained growth for the last four years. The reasons for not achieving the projection include the shortage of energy supply and the financial and economic crises of the world at large. Its share of the GDP has decreased from 13.5 pc in 2005/06 to 12.9 pc in 2008/09.


The service sector has contributed more than the agricultural as well as the industrial sectors to the GDP growth of the country. It was projected to grow at 7.1pc per year for the last five years. However, it has grown at 14.65pc for the last four years. The growing numbers of hotels and restaurants have contributed to such an increase.


In the last four years, investment increased at an average of 31.5pc covering 24pc of the GDP. This increase in investment was due to the implementation of the right policies, the improved availability and administration of land leases, progress in infrastructural development, and growth in human capacity, according to the report.


To attack the high inflation, the government has been using fiscal and monetary policies to stabilise the macro economy of the country. And the steps that have been taken have shown promising results in deterring the inflationary rate, Sufian told Parliament.


The reasons for the inflation included the creation of many job opportunities resulting in the increased income of individuals, which increased the aggregate demand of the country more than the aggregate supply. Especially when it came to the increase in the price of food products, the tendency of farmers to deposit their products for better times (to sell at a better market price), the shift to produce for the export market, and the foreign aid coming in the form of currency rather than in the form of food have all contributed to the shortage in the supply of food products. The high price increases in petroleum and construction materials also played their roles in the mounting inflationary rate.


Some of the steps that the government took to stabilise the inflation rate included the reserve requirement of banks being increased from five per cent to 25pc and the interest on savings being increased from three per cent to four per cent in order to encourage more savings. The other step the government took was borrowing money from national institutions other than banks so as to sack the excess amount of money from the economy.


As a result, the inflation rate decreased to 2.9pc in the month of April, 2010. The inflationary rate for food products reached negative o.49pc and for non-food products the inflation rate still hangs at 17.7pc, which will be given due attention, Sufian said.


In the last four years, the revenue of the government has reached 147 billion Br and its expenditures, on the other hand, was 170 billion Br. The government revenue in the fiscal year of 2005/06 was 20.1 billion Br and this figure reached 54.6 billion Br in 2008/09. Out of this, 53.1pc was gained from tax revenues and 20.5pc from nontax revenues. In the 2005/06 fiscal year, the government expenditure was 24.8 billion Br and reached 57.77 billion Br in 2008/09. The measures that the government took to increase its revenues included laying down a modern revenue administration system, increasing the awareness of the public with regard to paying customs and tax, the implementation of tax and customs laws, and providing transparent, speedy, and fair service to taxpaying citizens, according to the report.


In the last four years, the number of taxpayers who have taken taxpayer identification numbers reached 392,474 and the number of registered value-added tax (VAT) payers reached 33,976, Sufian said.


The government spent 36.2 billion Br in the fiscal year of 2008/09 on agriculture and food security, education, health, infrastructure, and water supply. In 2005/06 only 14 billion Br was spent.


The budget deficit for the fiscal year of 2008/09 was 3.2 billion Br. This budget deficit in 2005/06 was 14.7 billion Br. In 2008/09, the government issued treasury bills worth 28.5 billion Br and collected 27.8 billion Br.


In the last four years, 8.55 billion dollars was received in the form of foreign aid and loans. Seventy-three per cent was from foreign aid and 27pc from foreign loans. In 2005/06, 1.06 billion dollars was collected, and this reached 2.32 billion dollars in 2008/09. In the last nine months alone, 1.91 billion dollars was collected from foreign aid and loans, according to the report.


In general, inflation and a lack of foreign currency were the twin problems of the economy for the last four years, the minister said.
The report also shows that there has been encouraging development in water supply, infrastructure, telecommunications, and electricity.
The coverage of clean water throughout the country in 2005/06 was 35pc. In 2008/09 that figure reached 66.2pc, and it is expected to reach 68.5pc at the end of this fiscal year.


The coverage of roads in 2005/06 was 37,028km, and this was increased to 46,812km in 2008/09. This figure is expected to reach 49,000km at the end of this fiscal year.


The number of mobile (cell) phones in 2005/06 was 410,000. In 2008/09 it reached four million, and at the end of this fiscal year it is expected to reach six million.


The number of cities, towns, and villages that received electricity service in 2005/06 was 648. In 2008/09, the figure reached 3,367. The area coverage of electricity at the moment is 32pc, according to the report.




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