From: Biniam Haile \(SWE\) (eritrea.lave@comhem.se)
Date: Tue May 12 2009 - 11:01:06 EDT
THE INDIAN OCEAN NEWSLETTER N°1259
04/04/2009
ETHIOPIA
Zenawi brings the private sector to heel
After tightening the screws on the opposition ahead of the 2010 general
election (ION 1256), Prime Minister Meles Zenawi now wants to bring to
heel any private operators who do not apply his directives to the
letter. The fact is there are dark clouds looming on the country’s
economic horizon.
Even if the government spokesman Bereket Simon is pleased that the
Ethiopian banks were not affected by the subprime crisis or the Madoff
scam, the country is not isolated from the world economic downturn. It
is already starting to feel its first effects in the form of lower
prices and reduced international demand for its two principal exports,
coffee and flowers. Which is bad both for the country’s trading balance
and for the shortage of foreign exchange.
Foreign exchange shortage. The Ethiopian ministers are too easily
satisfied by the drop in the inflation rate, which is nevertheless high
(the annualised rate in January 2009 of 38% is expected to fall to 20%
by the end of the year). Their main concern is the shortage of foreign
currency: the exchange reserves correspond to five weeks of imports of
goods and services. This has already led the East African Bottling Share
Company to suspend its production of Coca-Cola in mid-March because it
could no longer import the raw materials. For its part, the French
brewery Castel was able to escape the same fate only because it had
sufficient stocks. A recent memo from the United Kingdom Ambassador
Norman Ling estimated that the Ethiopian government was trying to raise
the level of its fore ign currency reserves to two months of imports,
“but foreign exchange will continue to remain in short supply for
several months to come”. Particularly if private funds transfers and
international aid start to stagnate. The Minister for Finance, Sofian
Ahmed therefore went three weeks ago cap in hand to knock on the door of
the acting resident representative of the African Development Bank (ADB)
in Ethiopia, Peter Mwanokaiwe, to ask for a loan of $64 million to
finance the import of food products.
Authoritarian measures. The Ethiopian government is taking radical, even
authoritarian, fiscal and monetary decisions to try and stem the effects
of the international recession. The 10% devaluation of the Birr against
the US Dollar in January 2009, the first for two decades, could be
followed by other measures in the coming months because the Ethiopian
currency is still considered overvalued by between 10% and 20%.The
government has cut its domestic borrowing and the National Bank of
Ethiopia (NBE) is working at reducing the monetary mass in circulation.
The revenue authority has embarked on a vast operation of tax
adjustments to bring more money into the government coffers: the Italian
firm Salini Construction would see m to have won first prize, having to
pay an adjustment of 100 million Birrs (€ 6.5 million). Three months ago
the executives of the Star Business Group and of Nile Insurance found
themselves in the hot seat. Some of them ended up in prison, accused of
corruption. Last month Meles Zenawi took half a dozen major coffee
exporters to task. He accused them of delaying exports while waiting for
the price to go up again. The Prime Minister decreed this practice
“illegal” and revoked their licences. After that, the other operators
decided to keep a low profile.
Sharing tasks. Meles Zenawi no longer tolerates Western calls to open
the Ethiopian banking sector to foreign capital or to deregulate
telecoms, currently a State monopoly. At the end of March he and several
of his ministers pulled out at the last minute of a round table
organised in Addis Ababa by Economist Conferences because they did not
approve the text of one of the speakers. The event consequently had to
be cancelled. The Ethiopian ministers are now so tense that these days
they keep out of the way of the trade attachés of the Western embassies
who ask them for meetings to discuss the local economic situation. While
the Prime Minister is clamping down on the political arena and the
private sector, his wife Azeb Mesfin is acting as a true businesswoman
and has no qualms about intervening in favour of her friends (ION 1253).
She has just obtained the post of number two in the Endowment Fund for
the Rehabilitation of Tigray (EFFORT), a consortium of companies headed
by top officials in the Tigray People’s Liberation Front (TPLF, hard
core of the governing coalition).
http://www.africaintelligence.com/C/modules/login/DetailArt/LoginDetailA
rt.asp?rub=login
<http://www.africaintelligence.com/C/modules/login/DetailArt/LoginDetail
Art.asp?rub=login&lang=ANG&service=EVE&context=ARC&doc_i_id=58623866>
&lang=ANG&service=EVE&context=ARC&doc_i_id=58623866
----[This List to be used for Eritrea Related News Only]----