Addis Ababa, Ethiopia – A recent report by the Ethiopian Economics Association reveals a growing concern over Ethiopia’s external debt, which reached an alarming $62.5 billion by 2023, translating to more than $575 owed by each Ethiopian citizen.
According to Dr. Nasir Yenus, a senior macroeconomics researcher at the association, this substantial debt burden is attributed to a confluence of factors, including poor government spending management, inefficient project execution, and a failure to adequately expand economically supportive projects. The report further highlights sluggish export trade and a declining production capacity as contributing elements to the nation’s financial strain.
Dr. Nasir noted that many of the loans acquired were for “unproductive projects,” exacerbating the debt situation. While Ethiopia has managed to negotiate extended repayment periods, the debt could escalate further if funds are not utilized in a manner that bolsters the economy. Previous loan burdens have already led to government cost-cutting measures, which in turn have contributed to an economic slowdown.
The association’s findings indicate that Ethiopia faces a high debt burden when compared to its export earnings, though it stands at an average level in terms of annual production or GDP. Dr. Nasir also pointed out that the government’s strategy of increasing tax collection, particularly targeting employees and regular jobs, has unintentionally fueled inflation without stabilizing the national economy.
In light of these challenges, the researcher urged the government to prioritize expanding projects that stimulate economic growth. Furthermore, Dr. Nasir recommended exploring “new and unusual tax collection options” that would not intensify inflationary pressures, advocating for their coordinated implementation with relevant institutions.
The report also sheds light on social issues, noting that over 25% of women in urban areas are unemployed and that the country’s population policy, in effect since 1993, is no longer aligned with the current demographic realities. Adding to the economic and social concerns, the Ethiopian Economics Association’s report highlights a weakening of the government’s capacity since 2020 due to unpredictability, a lack of public trust, disagreements over development initiatives, ongoing conflicts, and a decrease in foreign investment activities.
Ethiopian Reporter
