Ethiopia’s Economy will show robust growth – IMF

The forecast, made at the end of a 15-day IMF led mission to Ethiopia, envisages that inflation would remain in the single digits range.

The expansion in economic activity has contributed to poverty reduction

But the IMF’s growth predictions are lower than those projected in Ethiopia’s five-year Growth and Transformation Plan (GTP).

The GTP, which expires in 2015, forecasts a 11.2 percent growth against IMF’s growth projection of 8 to 8.5 percent for 2013/14 and 2014/15.

The Bretton Woods institution also said the economic growth was benefiting Ethiopians.

“The expansion in economic activity has contributed to poverty reduction and progress toward achieving the Millennium Development Goals,” the mission said in a statement on Thursday.

IMF’s mission held discussions with senior Ethiopian government officials, including Prime Minister Hailemariam Desalegn.

Despite the country’s current trade imbalance, the IMF team led by Kal Wajid said the “economy continues to experience robust growth and single-digit inflation”.

He said deterioration in the trade balance this year was partly offset by higher net inflows from services and transfers.

“Strong external loan and higher foreign direct investment, however, allowed for a modest increase in gross international reserves,” he said.

Sizeable investment spending by public enterprises continues to absorb a large share of domestic financing, limiting credit available to the private sector.

The mission also “recommends continued cautious monetary policy stance that keeps money growth consistent with preserving the gains on inflation and achieving robust economic growth”.

The stable inflation conditions are ripe for developing market-based instruments of indirect monetary control.

In this respect, the mission said “there is a need to gradually raise nominal interest rates to activate the Treasury bill market for more flexible liquidity management”.

The IMF executive board is expected to complete its 2014 Article IV consultation in September 2014.