From: Biniam Haile \(SWE\) (eritrea.lave@comhem.se)
Date: Tue Sep 29 2009 - 12:26:40 EDT
Africa Press Organization
IMF Team Concludes Article IV Consultation Mission to the State of
Eritrea
29 September 2009
ASMARA, Eritrea September 29, 2009/African Press Organization (APO)/ —
An International Monetary Fund (IMF) mission visited Eritrea during
September 14–29, 2009 to conduct the 2009 Article IV consultation
discussions. The last Article IV consultation was concluded in April
2008. The mission met with Mr. Ali, Minister of Energy and Mines, Mr.
Woldemariam, Acting Governor of the Bank of Eritrea, Mrs.
Woldeghiorghis, Director General of the Treasury and Mr. Tesfaldet,
Director General of the Budget (both in the Ministry of Finance), other
senior officials, and representatives of the international community and
civil society. The mission is grateful to the authorities for their very
warm hospitality and fruitful discussions.
Mr. Mario de Zamaróczy, mission chief for Eritrea, issued the following
statement today in Asmara:
“The mission reviewed economic developments since the last consultation
and discussed the authorities’ macroeconomic policies against the
backdrop of a severe drought in 2008, the international food and oil
price crises, and the global recession. In the wake of these exogenous
shocks, Eritrea’s economic performance has weakened, with growth
remaining elusive, while inflation has accelerated and progress in
fiscal consolidation, stalled.
“The mission noted a number of areas where progress had been made. These
included continued investment in agricultural and irrigation projects to
wean the country’s farming industry progressively away from dependence
on irregular rainfall; public investment program in targeted key
sectors, such as education, health, mining, infrastructure, cement
production, tourism, green energy, and fisheries. These investments are
expected to contribute to a resumption of growth in the medium term.
However, even with the positive impact of forthcoming mining and cement
productions, Eritrea’s medium-term outlook could present downside risks.
The mission expressed concerns with regard to the size of the fiscal and
current account deficits, external and domestic debt levels, and high
inflation. Growth, even with the maturation of earlier investments, may
remain below the level necessary to achieve a significant reduction in
poverty.
“The policy discussions centered on a number of possible policy measures
to rekindle economic growth and private sector activities. In the short
run, the focus should be on restoring macroeconomic and financial
balances, through fiscal consolidation; reducing banking sector
financing of the budget deficit; and relaxing import and exchange
controls to re-launch imports of basic and intermediary goods. As global
pressures recede, it would be important to bring inflation under control
through restrained fiscal and monetary policies. The government’s
expenditure prioritization efforts were identified as key to raising the
effectiveness of public outlays in a resource-constrained environment.
In the medium term, the focus should be on measures that promote
external competitiveness; liberalization of the financial sector;
removal of administrative bottlenecks; and promotion of private
investment in the productive sectors. The mission believes that with the
right set of reform policies and building on the country’s rich human
and mineral resource potential, Eritrea could be well placed to rebound
as the world recession wanes.
“The mission welcomed the authorities’ renewed interest in drawing on
the IMF’s and other donors capacity-building assistance to develop
institutional and human capacity in the civil service. The mission noted
that the IMF’s East Africa Regional Technical Assistance Center (East
AFRITAC) was well placed to provide technical assistance on a grant
basis.
“It is expected that, subject to IMF management approval, the IMF’s
Executive Board will consider the mission’s report in December 2009.”
SOURCE
International Monetary Fund (IMF)
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