$725 mln fresh supplementary budget from the World Bank
The government announced that it has finalized a negotiation with the International Monetary Fund (IMF) to get close to half a billion dollar emergency finance facility (EFF) to fill the budget gap that will occur by the COVID 19 effect in the economy besides USD 725 million fresh supplementary budget support from the World Bank.
Early this week the ministerial committee to tackle the coronavirus has given a response to questions collected from media houses and journalists.
In his response Ahmed Shide, Chair of Economic Affairs Subcommittee and Minister of Finance, said that the government is undertaking several measures to mitigate the effect of the outbreak that massively affects the global economy.
He said Ethiopia’s economy will be affected in two ways; in the local business and the foreign trade. He reminded that there is a significant reduction of flower, textile and garment export that is almost nil, while the export of some other commodities like coffee is going in a good manner.
He added that the country’s foreign currency earnings from remittance have actually dropped because the diaspora is also economically affected because of the virus.
He indicated that there is a tendency that the government revenue is reducing because the slowdown of the economic activity.
He indicated that the approaches on tax support and rescheduling VAT settlement will be disclosed by the government.
“We have been working to identify the sectors that will be significantly affected by the pandemic,” he said.
He hinted that the government mitigation plan will be applied at a time but will take a gradual process as per the behavior of the effect to mitigate the challenge that the country economy faces.
For instance he said that the way out on the tax support and rescheduling the VAT payment has already been tabled for the government and will be disclosed recently.
He said that 4.5 billion birr will be available via NBE and DBE for SME, micro finance, cooperatives to ease the impact from the virus.
“The government’s holistic approaches will be applied,” Ahmed said.
Regarding getting reliefs from international partners and countires the government is strongly working, according to Gedu Andargachew, Minister of Foreign Affairs. He said the government is working to get debt cancelation and settlement extension that is crucial to bypass the challenge that the country faces due to the slowdown of the economy.
“Ethiopia is at the front on the diplomatic arena to get solution for poor countries besides itself,” Gedu said. “Countries should collaborate with each other to alleviate the impact of the virus; otherwise any country could not tackle the current challenge independently,” Ethiopia’s top diplomat said.
Ahmed said that to mitigate the hard currency shortage the government is working to mobilize foreign currency from international sources since the export earnings will not run as per the projection.
Mobilizing the finance from external sources will be seen in two ways. The first is getting general support for the economy that might be a budget support and hard currency earnings, according to the Economic Affairs Chair.
In this regard he said that the negotiation with the IMF to get USD 425 million emergency finance facility (EFF) was finalized and will be disbursed in the near future.
From the stated amount USD 415 million shall be is direct budget support and hard currency earnings for the country that is the balance of payment support for NBE and budget support for Ministry of Finance.
The negotiation with the World Bank is ongoing to get additional USD 725 million supplementary budget.
Recently the World Bank provided the second round of USD 500 million supplementary budget support for the Home Grown Economic Program. The fresh amount will support the initiative under the program.
In general the government is working to mobilize USD 2.15 billion for sectoral, budget and other areas support.
“These will improve the foreign currency earnings of the country and will help the demand of foreign currency for the private sector,” Ahmed added.
He indicated that the government may take several policy measures like possible tax exemption for wage income tax for industry parks and reschedule regular utility fees.