Ethiopia sees 7-8 pct growth

Nov 10, 2005 (ADDIS ABABA) — Ethiopia’s economy is on track to achieve a growth rate of 7-8 percent this year, despite the worst political unrest to hit Africa’s top coffee grower in months, a senior finance ministry official said on Thursday.

Analysts are concerned that last week’s bloody anti-government clashes and escalating tensions with neighbour Eritrea over a disputed border may weigh on Ethiopia’s economy.

But Fantahun Belew, the head of finance ministry’s the macro-economic policy and management department, said the economy was on the road to recovery after contracting in 2002/03 largely due to a severe drought.

“We hope we will continue to have a stable macro-economic (environment) with economic growth of between 7 to 8 percent this year,” Fantahun told Reuters in an interview.

“Our ambition is actually to scale that to achieve 10 percent growth in the long-term. We project also single digit inflation, not more than 10 percent.”

Ethiopia recorded a real gross domestic product (GDP) growth of 8.9 percent in 2004/05 fiscal year ended in June compared with 11.4 percent the previous year.

The economy recorded negative growth of 2.9 percent in 2002/03 undermined by two consecutive years of severe drought.

At least 42 people were shot dead when police confronted demonstrators in the capital Addis Ababa last week following a call by the biggest opposition party for new protests against May polls it says the government manipulated.

Prime Minister Meles Zenawi, who denies ballot fraud, said on Wednesday he believed the worst of the violence was over and said its instigators would be charged with treason. The protests brought the capital to a virtual standstill for almost a week, but on Thursday business was almost back to normal with shops, banks and offices open. However, clashes and deaths have been reported in other regions in the last few days.

The recent killings follow the deaths of 36 people in June in similar protests over Ethiopia’s parliamentary vote.

Fantahun said while prolonged violence could dampen investor confidence, he did not expect the country’s political problems to last for long.

“We hope also that this is temporary (and) will not affect our projections,” he said. “These are very short (violent spells) and will not have major effect on economic projections.”

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Ethiopia’s agriculture-based economy suffered from many years of economic mismanagement during the nearly 20-year rule of ousted Marxist dictator Mengistu Haile Mariam.

Sub-Saharan Africa’s second most populous country is ranked as the 7th poorest in the world, with high rates of unemployment and some of the world’s highest rates of HIV/AIDS.

Foreign donors finance about one-third of Ethiopia’s annual budget, sending more than $1 billion a year to the country, which also qualifies for the Heavily Indebted Poor Countries initiative.

Fantahun said the government had introduced economic reforms to ensure growth is sustained to pull millions out of poverty.

The reforms aim to boost rural agriculture production, transform the civil service, raise investment in the regions and change the tax regime to increase internal revenue collection.

The European Parliament last month warned of possible cuts in development aid to Ethiopia unless there was an end to the “persecution and intimidation” of opposition groups.

Fantahun said he hoped the fact that aid was used properly would convince donors to continue supporting Ethiopia’s reforms.

“The government is more accountable and transparent in managing financial resources,” he said. “We hope the development partners will rely (focus) on our performance.”

(RE/ST)