Ethiopia's Business Climate Worsening,
Chamber of Commerce Says

19 August, 2009 | By Jason McLure
Bloomberg

    Power outages, shortages of
    foreign exchange and limits
    on bank lending resulted in
    Ethiopia’s business climate
    deteriorating over the past
    four months, the chairman of
    the country’s largest business
    association said.

    The Horn of Africa nation’s
    manufacturing industry has
probably contracted during the past year and profit at banks and
insurance companies has been hampered by inflation and government
restrictions on lending, said Eyessus Work Zafu, president of the Addis
Ababa Chamber of Commerce and Sectoral Association.

“The private sector definitely is in a very sad state,” Work Zafu, said in
an interview today at his office in the capital, Addis Ababa.
“Manufacturing is already on its knees. Small as it may be I would say
it would have shrunk because of the power outages.”

Manufacturing accounts for about 5 percent of Ethiopia’s output,
according to the World Bank.

Supply shortages led the state-run Ethiopian Electric Power Co. to begin
blackouts in February and since June, the utility has provided power to
customers only every second day. At the same time, Ethiopia’s central
bank has been rationing foreign exchange in an effort to defend its
currency, the birr. The resulting shortage of foreign currency has cause
delays in imports of raw materials and consumer goods.

The government of Prime Minister Meles Zenawi has also capped
lending and increased reserve requirements for banks in an effort to
slow inflation, which peaked at 64.2 percent in July 2008. Consumer
prices declined by 3.7 percent last month, the country’s Central
Statistical Agency said Aug. 11.

Tax Collections

A government initiative in the past year to collect more tax from the
business community has also hurt growth of the country’s private
industry, Work Zafu said.

While government and business leaders had initially believed the global
financial crisis would have little impact on Ethiopia’s “relatively isolated”
economy, “experience has shown that we were not entirely correct in
that,” he said.

Remittances from Ethiopians living abroad and aid from foreign donors
has been affected by the economic crisis, he said.

Ethiopia’s economy may be strengthened if the government negotiates a
financing deal with the IMF, Work Zafu said. The IMF and Meles’
government are currently discussing a package to help the country cope
with the global economic crisis.

A deal would improve Ethiopia’s foreign currency reserves and
encourage other international lenders to provide financing to the
country, Work Zafu said.

The IMF projected Ethiopia’s economy would grow by 6.5 percent or
less in the fiscal year ending July 7, 2009.

To contact the reporter on this story: Jason McLure in Addis Ababa via
Johannesburg at pmrichardson@bloomberg.net.
All rights reserved.
Ethio Quest News
Together We Can Make It!
Ethio Quest News:
For latest Ethiopian
News, views, Reviews
and More
You need Java to see this applet.
Latest Energy News
Biggest Dam in Ethiopia Near Completion





( VOA ) - " Four 75 - megawatts generators and
four turbines beneath the dam will begin service
soon, according to the coordinators. The dam has
been gathering the waters of the Tekeze River and
its tributaries in northern Ethiopian....More