Ethiopian Ministry of Finance announces bold, ambitious five-year economic plan
August 10 2010
The Ministry of Finance and Economic Development (MoFED) has been drafting different versions of Ethiopia’s next five-year macroeconomic plan for the past six months, the final version of which Sufian Ahmed, minster of MoFED, revealed on Thursday, August 5, 2010.
The plan, labeled the Five-year Growth and Transformation Plan, is based on the performance of the economy in the last five years and envisages the economy to grow, at worst, by 11pc every year and, at best, to double by the year 2015.
This is good news for Zemedeneh Nigatu, managing partner of Ernst & Young (E&Y) which in September 2009 forecast Ethiopia’s gross domestic product (GDP) to reach half a trillion dollars in Purchasing Power Parity (PPP) to make Ethiopia the third biggest economy in Africa by the year 2023.
“I am pleased that the government’s prediction is in line with our forecast which we did independently a year ago,” Zemedeneh told Fortune. “If the economy continues to double every five years as is mentioned in the best case scenario, the GDP figure will be around the same as we have forecast.”
The country in the past five years has been growing at an average of 11pc which is the basis for the projection for the next five years, according to the MoFED.
The plan focuses on seven strategies, called the pillars of the plan, which include the rapid growth of the agriculture sector, industry, and improvement of social services.
The plan forecasts that Ethiopia will be able to, for the first time, ensure food security in the next five years by doubling the total agricultural production.
“This does not mean that there will not be people in poverty or droughts will not occur. It means that we will be able to pay for all our food needs ourselves,” said Sufian.
Even though agriculture production is expected to double, the plan forecasts the sector’s contribution to GDP to decrease as the contribution from the industry sector increases in line with the government’s economic strategy of Agricultural Development Led Industrialisation (ADLI).
The plan forecasts agriculture to play a major role in earning the country huge amounts of revenue, contributing 12pc to the GDP, and envisages stepped up import substitutions to close the gap in the trade balance.
“As agriculture evolves into agro industry, Ethiopia will start exporting processed agricultural products, adding value along the chain,” said Zemedeneh. “Even coffee, which contributes greatly to the export revenue, will be processed before export adding more value and hence earning more.”