Ethiopian officials complained in September about International Monetary Fund requirements that it privatize several industries in order to receive further IMF aid. Ethiopia formally rejected IMF requirements that it privatize state-run telecommunications, power and water utilities.
The IMF agreed on a $190 million loan to Ethiopia in 2002 to reduce poverty in that country, and provided it with an emergency loan of $14.3 million in August 2003 to combat the effects of drought.
In a press release announcing the August loan, IMF Deputy Managing Director and Acting Chairman Shigemitsu Sugisaki said of Ethiopia’s economic performance,
Recent economic performance has been seriously affected by a severe drought in 2002, the worst in many years. As a result of the drought and a sharp drop in cereal production, real GDP declined in 2002/03, and food prices rose markedly. An estimated 12.6 million people are in need of food assistance.
Despite this shock, Ethiopia’s performance during the second annual program was broadly satisfactory. All the quantitative performance criteria and benchmarks through December 2002, as well as the indicative targets for end-March 2003, were observed. In particular, the introduction of the value-added tax was carried out in January 2003, a performance contract was signed with the Commercial Bank of Ethiopia (CBE) in June 2002, and an audit of the CBE by independent auditors was completed in May 2003, after a delay of four months. The ongoing decentralization of fiscal powers to woredas (local districts), however, contributed to delays in the implementation of structural benchmarks (and HIPC Initiative completion point triggers) related to the improvement of public expenditure management.
Ethiopia apparently wants to retain a controlling interest in any utilities that it privatizes, even though at the moment the state industries represent a drain on Ethiopia’s budget.
Meanwhile, the World Bank and IMF plan to send representatives to Ethiopia by the end of November to evaluate Ethiopia’s progress in making structural changes that it agreed to in order to receive the 2002 loan.
Ethiopia hits out at IMF. The BBC, September 1, 2003.
Ethiopia rejects IMF proposal to privatize loss-making state firms. Agence-France Press, August 31, 2003.
IMF to send experts to review EthiopiaÂ’s achievements. Tamiru Geda, CapitalEthiopia.Com, September 29, 2003.
IMF Completes Review Under Ethiopia’s PRGF Arrangement and Approves US$14.3 Million Disbursement. Press Release, International Monetary Fund, August 28, 2003.