From: Berhane Habtemariam (Berhane.Habtemariam@gmx.de)
Date: Wed Aug 19 2009 - 15:36:42 EDT
Ethiopia's Business Climate Worsening, Chamber of Commerce Says
By Jason McLure
Aug. 19 (Bloomberg) -- Power outages, shortages of foreign exchange and
limits on bank lending resulted in
<http://www.lib.utexas.edu/maps/africa/ethiopia_pol99.jpg> 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 <http://www.addischamber.com> 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 <http://www.eepco.gov.et> 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
<http://search.bloomberg.com/search?q=Meles+Zenawi&site=wnews&client=wnews&p
roxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=
wnnis&sort=date:D:S:d1> 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.
----[This List to be used for Eritrea Related News Only]----
