Tag Archives: Economy privatisation measures

Financial sector will not be open to foreign investment

7 Sep

Posted by The Ethiopia Observatory (TEO)

The government, which launched a three year economic reform program, Homegrown Economic Reform, says the financial sector will never be open to foreign actors in the reform period.

The main target of the reform program is to accelerate the economic growth besides to correcting the economic imbalance that put the country on debt stress, hard currency crunch and inflation.

Finance & economy minister Ahmed Shide (Credit: The Reporter)

In the first public discussion about the program, Ahmed Shide, Minister of Finance, said that the capital account and banking business will not be opened for foreign actors. “This issue is not included on this program period. It will consider the national interest and based on the strength of our economy and handling of the vulnerability,” he explained.

The government has been easing the closed economic sector for all interested actors including opening the finance sector for Ethiopian born foreign citizens, which is the first time since free economy was endorsed early 1990s.

Ahmed said that this period will focus on improving the capacity of local financial firms and putting them in the capacity to be on a competitive status before opening to others.

Eyob Tekalign, State Minister of Finance, said that the National Bank of Ethiopia under its reform program is working to improve the financial sector regulation. He said all banks including the two public financial firms would be seen equally by the NBE as per the international banking experience.
The state owned Commercial Bank of Ethiopia (CBE) and Development Bank of Ethiopia (DBE) are in the process of reforming to follow the industry best practice, according to Eyob. “NBE is applying the internationally accepted regulatory framework to improve the banking sector,” he added.
“DBE, which is on high non performing loan rate, has proposed its reform agenda and it is evaluated by NBE board in details. The CBE reform is evaluated under the public enterprises reform jointly,” Eyob said.

Eyob said that to enhance the access to capital and development the finance infrastructure the monetary policy will be improved that will change the T-bill and lifting the NBE bill that private banks buy a 27 percent bond on their every loan approval.

“As per the schedule of the government the secondary bond market will be also introduced regarding to access to finance,” he added.
The homegrown economic reform has three major pillars; macroeconomic, structural and sectoral reforms. “The economic reform should have holistic and comprehensive approaches that the macroeconomic reform will see foreign exchange imbalance, inflation, access to finance and debt stress, and structural reform will also solve the bureaucratic challenges, doing business and sectoral reform looks specific problems on every sector,” Eyob said.

In the first public discussion about the three year program Yinager Dessie, Governor of NBE, said that the local private sector will get more attention since the government reduced its involvement in the economy. “The access to finance for the private sector, local investor, the government will reduce its consumption of finance due to it will focus on the accomplishment of the started projects rather than introduce new investment or public consumption,” he said.“The manufacturing sector will also be seen on this manner and improve the access to finance and foreign currency,” he added.

The international partners like the International Monetary Fund recommended that the government expand access to finance for the private sector than consuming under public projects, while the government was arguing that it is providing adequate finance for the private sector.
However, in the discussion Eyob said that lack of adequate access to finance for the private sector is one of the reasons for the macroeconomic imbalance in the past.

Last week CBE stated that in the past financial year it has disbursed 129 billion birr loan and advances and of which the private sector secured only 22.2 billion birr, which indicated that how the public borrowing is very high compared with the private sector, according to experts.

 

/The Reporter

 

 

%d bloggers like this: