Eritrean president – government in “hard currency management crisis”

ASMARA, Jan 4, 2004 (Eritrean radio) — Eritrean President Isayas Afewerki has blamed the shortage of hard currency in the country on the government’s “generosity” in subsidizing the supply of fuel. In a live interview he gave to Eritrean radio and television on 3 January 2005, the president also said “our handling of hard currencies has not really been commensurate with our capacity, and did not consider future challenges that we may encounter. T

he following is an excerpt from the interview; subheadings inserted editorially:

[Interviewer] Dear listeners, we have as usual prepared you a special interview. President Isayas Afewerki is currently in our studio to answer our questions.

First of all, Happy New Year President Isayas. On behalf of our radio listeners and our television viewers and the entire staff of the Eritrean radio and television, I would like to thank you for accepting our request to come and give us this interview.

Let us focus first on our internal affairs and development endeavours. During its recent meeting, the Eritrean cabinet ministers came up with a nine-point working plan. What does this plan contain? What role will it play in the general development of our economy?

Best wishes

[President Isayas] I would like to take this opportunity to wish the Eritrean people inside and outside the country a Happy New Year and that the year 2005 be a year of hard working, development, progress and prosperity.

The nine-point working plan is not new as such, but is aimed at strengthening our earlier resolve to concentrate more on what we should do in the year 2005 and has some indicators on how to measure our achievements. [Passage omitted]

[Interviewer] Ten years ago, government institutions have been privatized to give incentives to the private sector. How much have these institutions contributed to the national economy? If they are not productive, then there is no reason as to why the government should not reclaim them with the view to reactivating them for the benefit of the national economy.

[Isayas] This was an issue extensively debated at the recent cabinet ministers meeting. The minister of trade and industry had presented detailed statistical data on the issue. I would not like to go into details on the debate. What does the picture look like in fact? Probably, some of the details should not be made public. But it is appropriate to assess the developments in the past decade and look into where we started from, what our objectives were in the first instance and what the primary objectives of our intentions were. We might have forgotten how the Dergue [former Ethiopian military regime] era destroyed institutions and housing infrastructures.

Primarily, when we gained our independence, our policy was to return property to its owner. We can confidently say the problem of housing has been resolved. The good intentions we had by then was to return the property to its rightful owner. It was decided that the destruction and devastation caused by the Dergue’s nationalization should be rectified. It was also decided that factories, industries and private institutions should be fully or partly privatized. The following question was how do we privatize or sell these institutions. So we came up with the idea of selling them out at throwaway prices. That was not a problem. The major issue was the person or institution that would buy them should have a good business plan, experience, know-how to introduce new technology, create more employment, train them, improve quality and quantity as well as productivity, and strive to produce products that would substitute imported ones, and, if possible, export products of competitive standards.

The focus of the sale was not on how much the institution would actually cost, but on how much it would meet expectations of enhancing the national economy. When the said institutions were sold, the buyers did not pay cash. They borrowed from banks. This was done purposely with expectations that they would be beneficial in future.

The detailed report presented by the minister of trade and industry in the recent cabinet ministers’ meeting on the privatized institutions was really disappointing. These institutions have not introduced new technology, they have not created employment opportunities, in fact, their production level has gone down, the quality of their products has deteriorated. In general, almost all of them are in crisis and are heading towards bankruptcy. There may be a few exceptions, but most of them are found in such a critical state. We have all the necessary detailed data.

They [their owners] talk of lack of foreign currency. What are they going to do with the foreign currency. They have not yet repaid the money they borrowed from banks. They have not implemented the proposal that they would carryout when they bought the institutions. Foreign currency is issued to institutions that would benefit the country, the government and the people. We could even give such institutions priority for foreign currency. But these institutions are not in good shape and, in fact, they are in such a crisis and if we allow them to borrow more, then, at last, they will default repayment schedules and create more bad debts for the banks. Therefore, the experience we have is not to be seen lightly. When we initially allowed such a programme to go ahead, we bore in mind that this problem could arise, but we said let us give it a try.

The Ministry of Trade and Industry has carried out a proper study that should be implemented properly. The solution is not to carry out studies and identify the problem, but to take proper action to rectify and the problem.

Fuel crisis

[Interviewer] The increase in oil prices in world markets has affected us as it did all other countries. However, an action taken [by the government] has still been maintained. Since the fuel issue affects everything, what is the solution to the problem?

[Isayas] Yes, the increase of oil prices in the world has affected even countries with advanced economy, leave alone countries like ours with nascent economy. [Brief transmission breakdown] though it is impossible to tell the exact figure, perhaps there was an increase not less than 60 per cent, in prices alone. The budget is very huge. It can be estimated 1.6bn or 1.7bn nakfa a year. However, that is not the problem. When it is said that the government subsidizes it, we can interpret subsidy the way we want it. But, what is subsidy? The government spends the foreign currencies it obtains through various ways on fuel. Fuel is sold in nakfa then you have to convert the nakfa into a hard currency to buy fuel. It is not easy to go and convert the local currency anywhere you want.

I can say the problem in saving foreign currency is the result of the government’s generosity. Generosity is sometimes stupidity. However, when repeated again and again, goodwill is [he changes thought], our handling of hard currencies has not really been commensurate with our capacity and did not consider future challenges that we may encounter. I do not want to go into details about the speculation [last word in English] on the handling of foreign currency in the country. But, I cannot say it is the problem of those who are mistaken. It is the problem of the government and measures are being taken to correct it. Our annual consumption is continuos because all or most of our activities rely on fuel. To cover all the expenses properly, we should not only focus on prices alone. There should be control on consumption as well. The fuel we buy should used wisely where it is needed. We should be able to identify our priorities.

Hard currency management crisis

Here, the government should be able to exercise absolute control in the management of hard currency. This is not the work of a humanitarian [agency]. Government does not do the work of a humanitarian [agency]. The government should be able to manage the flow of hard currencies properly. Here, the government is in a management crisis and it should be able to overcome it. At least, we should be able to overcome this in 2005.

There are those external impacts such as the increase of oil prices in the world markets. However, we are working to bring the situation to normal by correcting our own internal problems. Illegal activities such as misuse of fuel are being witnessed, but it does not mean we do not know that or we are not giving it attention. But, the focus should be at solving the main problems sustainably [last word in English]. Perhaps, the measures may not have been declared or may not be declared, but the objective is what I mentioned earlier.

Material from the BBC Monitoring Service.