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President discusses economic issues

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At the opening of parliament the president promised several economic changes would be taken by the government in the budget year.
President Mulatu Teshome (PhD), who recalled the challenges that the country faced in the political, social and economic sphere in the past few years, stated that several improvements will take place in the remaining period of the GTP II and this budget year.
The president said that the situation in the past frustrated the private sector. “The revitalization policy is expected to be in place to back the economic development and we should grow as we did in the past,” Mulatu said in his opening speech on Monday October 8.
In his speech that expressed the government’s plan for the year he indicated that under the development of a democratic developmental free market the government will work to stabilize the macroeconomic condition and improve of socio economic development.
“We will work to improve the implementation of the free market and expand the country’s process in international economic integration based on fair competition and clarity,” he said.
The monetary and fiscal policy will be strongly followed to normalize the macroeconomic condition, according to the plan for the year.
Government revenue and expenditures are the other priority areas for the year.  In the past two years the government worked to minimize expenditures in federal offices and implement tight budget controlling mechanisms. However, tax collection also significantly declined in the past budget year. According to the communiqué of the congress of the ruling party that concluded a week ago tax collection will be one of their top priorities for the year.
Last year the government was able to collect 200 billion birr from the target of 250 billion. The country’s tax  to GDP ratio is one of the poorest in the region, according to international financial organizations. Based on last year’s report the country’s tax to GDP ratio is less than 13 percent, which is lower than the regional average. The government is looking to improve it to 17 percent in 2020.
Debt management is the other priority area for the year. The country has been stressed from debt because of some projects that are lagging or are running below expectation. This has forced the government to suspend most foreign commercial loans for the past two years. Mismanagement of finance was also stated as one of the major challenges which has caused the country to be unable to perform well in terms of foreign loans.
According to the government’s plan, the loan management will be undertaken as per the expected limit, although the limit was not directly stated. The government guarantee would be also minimized in the coming periods, according to the president’s speech.
In addition, non public sectors or the private sector will also be included in the public financial scheme, which would be a new thing for the country.
The capital market is also stated as one of the new operations for the year, while details were not given. The president’s speech directly mentioned the insurance sector saying that they will improve their operation and insurance coverage. The non performing loans (NPL) of the banks was also covered by the president’s speech as he said it would be improved under international standards.
Except for the Development Bank of Ethiopia the Ethiopian banking sector was run on its good NPL standard at a level of 5 percent but experts stated the past year’s performance was not like the previous trend.
Capital reported that over the past few months that the highest NPL ever occurred during the previous fiscal year since the economic condition was very poor during that budget year.
Experts argued that the last year’s hard currency shortage and instability has forced the business community mainly manufacturers to run under their regular performance causing them to have difficulty settling their debts on time. “The effect on the private sector is directly seen in the financial industries since they are working together,” experts told Capital in the past few months.
In his speech which mostly covered economic issues the president hinted that several economic policies and laws would be ratified or amended in the budget year.
In addition  several restructures at the federal level are expected to take place in the coming few weeks when the PM comes to the parliament.
About two months ago Capital reported that the number of ministries and cabinet members would be slashed. In its latest meeting the council of ministers announced that the number of cabinet members would be reduced to 20 from 28.

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