The need for new financing strategies and improved access to global capital markets for development finance has become more pressing than ever. As a result, Africa requires an additional $1.3 trillion per year to make meaningful progress toward the Sustainable Development Goals (SDGs), according to experts.

In response to this pressing need, key policymakers, government officials, and experts from across Africa gathered in Addis Ababa for a three-day regional workshop titled “A Continent in Conversation: Alternative Strategies to Improving Africa’s Credit Ratings.” The event aimed to discuss the strategic and policy impacts of sovereign credit issuance and their influence on Africa’s development funding landscape.

Recent downgrades of African countries by the Big Three credit rating agencies – Moody’s, S&P, and Fitch Ratings – have highlighted the urgent need for many African nations to address their fiscal challenges and secure development financing. The workshop, which brought together nearly 50 stakeholders and key government officials from Ethiopia, Tanzania, Kenya, Uganda, and the United Nations Economic Commission for Africa (UNECA), focused on equipping participants with the knowledge and tools needed to improve their credit ratings processes.

Speaking during the opening session, Samuel Doe, Resident Representative of UNDP Ethiopia, underscored the importance of understanding credit ratings processes and their implications for development financing to achieve sustainable development goals. “Credit ratings matter because they can enhance a country’s reputation and market standing,” he emphasized.

Shigeki Komatsubura, Resident Representative of UNDP Tanzania, urged African countries to leverage the opportunity to understand credit rating processes and restore their collective credit strengths to the levels achieved in the early 2000s with the help of UNDP’s groundbreaking Africa credit rating initiative.

This initiative, which includes a resource platform, advisory services, and credit rating capacity building, aims to provide policymakers with practical knowledge and training in the credit rating space. By equipping African nations with the necessary tools and strategies, the workshop aims to help bridge the financing gap and accelerate progress towards the SDGs.

As the global community works towards a more sustainable and equitable future, the need for innovative financing solutions and improved access to capital markets has never been more critical. The Addis Ababa workshop serves as a crucial step in empowering African countries to take charge of their development trajectories and secure the resources needed to build a prosperous and resilient continent.

Ethiopia is preparing to celebrate its New Year, a significant cultural event marked by various religious and traditional ceremonies. This year’s festivities, however, are tinged with concern as the country grapples with severe inflation and rising living costs, impacting the joy typically associated with this time of year.

The Ethiopian New Year, which symbolizes renewal and the arrival of spring, is often celebrated with hopes of forgiveness and new beginnings. Traditionally, the festival is characterized by vibrant ceremonies and communal gatherings. However, the economic landscape in 2024 has posed significant challenges for many Ethiopians, leading to a more subdued atmosphere as the holiday approaches.

This year, inflation has severely tested the purchasing power of consumers, with many struggling to afford basic goods. The recent implementation of a new foreign exchange policy by the federal government has further exacerbated the cost of living crisis, causing food prices to rise sharply. Many citizens express concerns that the current economic situation may worsen in the coming months, as the foreign exchange market has not met community expectations.

In Addis Ababa’s Akaki market, one of the largest market centers in the city, consumers are feeling the pinch. A survey conducted in various locations revealed that many shoppers are unable to purchase essential items due to soaring prices. Alemitu Getahun, a resident of Addis Ababa, shared her frustrations, stating, “We are living in a very poor condition. Consumer goods have increased by more than 50% compared to just a few weeks ago.”

The price of staple items has skyrocketed, with onions selling for between 100 and 120 birr per kilogram, and edible oils exceeding 1,300 birr per litter. The cost of chicken, a traditional dish during the New Year celebrations, has also surged, with prices for different types of chicken ranging from 1,000 to 2,000 birr.

Simerat Berket, a long-time trader in the pepper market, noted that the price of peppers has increased to between 350 and 400 birr per kilogram. Eggs have also seen significant price hikes, making them a luxury for many families during the holiday season.

Despite the economic hardships, the New Year is still a time for traditional celebrations, including the cleaning and renovation of homes, purchasing new clothes, and preparing festive meals. However, the rising costs have made it increasingly difficult for families to participate fully in these customs.

In response to the economic climate, a trade exhibition named “CBE BIRR Plus” has been organized, running from August 15 to September 10, 2024. This event aims to connect merchants with consumers ahead of the New Year, with an estimated 10,000 visitors expected daily. However, even at the exhibition, prices for traditional clothing have surged by 50% compared to last year, with complete outfits now costing up to 25,000 birr.

As Ethiopia prepares to usher in the New Year, the juxtaposition of celebration and economic hardship highlights the challenges faced by many citizens. While the festival traditionally symbolizes hope and renewal, this year’s celebrations are marked by a pervasive sense of uncertainty regarding the future.

Ethiopian manufacturing industries are grappling with significant challenges following the government’s recent decision to implement a new foreign exchange rate. Manufacturers who previously paid for their Letter of Credit (LC) in the old currency are now forced to adjust to the new currency rates, raising concerns about their viability in the market.

The National Bank of Ethiopia’s (NBE) shift in foreign currency policy has left many manufacturers, who import raw materials for their operations, facing potential bankruptcy. These businesses had opened LCs and made full payments based on the old exchange rate, but are now required to pay in the new currency without receiving their imported goods.

Manufacturers have reported that the sudden change in currency has effectively doubled their costs. “We were informed that we will have to pay double the current foreign currency price, which is a significant burden,” stated a representative from the manufacturing sector. Many producers, who had relied on the Development of Bank for their raw material imports, are now struggling to maintain operations.

The impact of these changes has been severe, with many companies at risk of closure. “If the government does not intervene to support the manufacturing sector, we will have no choice but to leave the market and lay off our workers,” another manufacturer warned.

The situation has prompted calls for government action to support local industries. Industry leaders have emphasized the need for assistance, arguing that the government should provide subsidies or other forms of support to help businesses navigate the new financial landscape.

Sources indicated that while the changes are part of a broader policy shift, the unexpected nature of the adjustments necessitates a review of how to support affected businesses.

Ethiopia has invested heavily in its manufacturing sector, with significant resources allocated to developing industrial parks. However, the current economic climate, exacerbated by the currency reforms, poses a serious threat to the sustainability of these investments.

The future of many businesses hangs in the balance, highlighting the urgent need for government intervention to ensure the stability and growth of the sector.

Local investors in Ethiopia are facing significant financial pressure following a recent decision to double the rental fees for working sheds in industrial parks. This increase comes in the wake of changes to the foreign exchange market, which have further complicated the financial landscape for businesses operating in the country.

The new rental fees, which have increased dramatically, are causing distress among investors who previously paid their rents in birr. According to industry insiders, the cost to rent one square meter of shed space has surged from an average of $2.75 to a level that has effectively doubled the overall rental payments. For example, investors who previously paid 100,000 birr for rent are now facing bills of 200,000 birr.

Investors have expressed their concerns about the sustainability of their operations under these new financial burdens. Many are calling on the government to intervene, citing difficulties in hiring workers, importing raw materials, and maintaining their market presence. Reports indicate that some companies are on the brink of bankruptcy, leading them to consider relinquishing their current rental agreements in favor of alternative market options.

At a recent forum held at the Sky Light Hotel, organized by the Industrial Parks Development Corporation (IPDC) and the Ethiopian Investment Commission (EIC), stakeholders discussed the implications of the increased rental fees. Ashenafi Muse, President of the Addis Ababa Investors Forum, stated, “The amount of fees has doubled, and investors are not in a position to pay.”

The industrial sector, which is labor-intensive and requires substantial investment, is particularly affected by these changes. Investors noted that while they have historically engaged in various manufacturing sectors, the recent shifts in the foreign exchange market are prompting many to retreat from their commitments.

Fisseha Yitagesu, CEO of IPDC, acknowledged the pressures that the new rental rates have placed on investors. He indicated that while the increase is a result of policy changes, it was unexpected and has prompted the formation of a committee to explore potential solutions.

The challenges facing local investors come at a time when Ethiopia has invested over $1.6 billion in developing industrial parks over the past nine years. However, the returns on this investment have been modest, with exports from these parks totaling only $1.2 billion.

Local investors are urging the government to provide support and consider subsidies similar to those offered in other sectors. Without intervention, the future of many businesses operating in Ethiopia’s industrial parks remains uncertain.