Ethiopia: Interview With Prime Minister's Current Issues

Djibouti (HAN) January 30, 2006 - The current Prime Minister of Ethiopia Zenawi held an interview in his office with local private and government media journalists last Friday on current issues.

Question: It is anticipated that we would register double-digit economic growth this year like the recent years. What factors do you think enable us to expect such an economic growth? On the other hand, some assume that the prolonged controversy in the towns over national election vote counts may pose a negative impact on the economic development. Is there any conducted study on the issue? If any, what is the finding?

Meles: In fact, the 1998 E.C. economic growth is certainly known around the end of the budget year. However, it is true that the country’s economy is dependent on agriculture, on that of the harvest season in particular; thus we can evaluate the amount of the yield at the end of the harvest season and could anticipate the abundance of the production. In this regard, a team comprising different international and local organizations has recently conducted an assessment on the yield and predicted the quantity. According to the assessment, our yield has shown 15 per cent growth. On the basis of this evaluation, it is estimated that the yield growth in this fiscal year is similar to that of the previous year and before. The basis of the estimation is the yield in agricultural sector.

It is difficult to exactly tell to what extent the havoc that came out in connection with the election affected our economy. I will soon present to the parliament the detailed report. Nevertheless the general tendency is that our economy is steadily growing. Investment is substantially increasing. Bank loans are also considerably rising. As regards export the six-month volume alone has shown 33% growth as compared to the previous budget year similar season. Hence, it is difficult to judge that the havoc has posed a negative impact on the economy.

On the other hand, it may be thought that the economy could have shown better growth than the present standing had it not been for the impact of the unrest. What we know in practical terms is that our export volume in the month of October went down for a while. But the export volume of the following months, November and December, compensated that of the October breakdown and it has been possible to register 33% growth when compared with last year’s similar time. So, I do not think there is tangible negative effect on the economy. Perhaps it is possible, at least, to guess theoretically that we could have better results had there been no insurrection.

Question: You have already told us that abundant yield has been obtained this year from the agriculture sector. However, fall in price has not yet been observed. Rather the price of consumption goods is on the rise. That means the life of low-income urbanites is being affected. What is the government intending to do to address this problem because many are surprised by the parallel price rocketing while the product is increasing?

Meles: I do not think there is controversy over the increase of the product because it is affirmed by governmental and international organizations. That being the case, however, there is no fall in price of grains. The reason is mainly that our agriculture product export is increasing. For instance, currently there is better export earnings from grains, oil seeds and spices than coffee. That means these products are on the top rank in the export market than coffee. Naturally there was a time when coffee constituted 70% of our export earnings. Now it has gone down to 25%. The reason for the declining of the ratio of coffee earnings is the increase of export not only in oil seeds and grains but also in other crops. For instance teff takes currently 68% of the crop export. Consequently teff has become one of the export products being an alternative export item and the price in the export has also turned out to be attractive; hence price increase has come about. Likewise production of sesame is tremendously increasing. For instance, 40% growth has been attained in sesame production in this harvest season. Therefore, the farming produce is shifting to cash crops and export types.

On the other hand, the farmland covered with food crops is decreasing. Food crops are also exported. That is why the price does not fall. As we know, in the last three consecutive years there have been good harvests but there has never been any fall in prices. I think this is a great victory. Previously, we know that whenever there is danger in production fall, prices rise; and when there is enough rain and good harvest, prices fall. Farmers suffer in both cases. Currently, however, in accordance with the implementation of market-led, particularly global market-led, agriculture development direction, there is a situation in which farmers get the appropriate price. There is a belief and hope that this would continue in the future.

Apart from this, the recent price rise regarding food items on consumers, particularly on the poor people in the towns, is expected to result in some problems. Of course, exporting is not the only cause for this. There is no situation that influence farmers to bring their produce to the market. In areas producing in excess of their needs, we have good harvest in successive years. We know that farmers bring their produce to the market whenever they are in debt and have loans to service. Since there is no serious worry to this level for the farmers at the moment, there came about a situation in which they do not bring their produce to the market. All these add up to create a problem for a shortwhile. We would take some measures in the near future to set this situation right.

The first measure would be to stop exporting food items for an indefinite period. We would bring to market food items stored at various government body levels. Also, we have started taking measures to improve ways of making food items accessible to consumers by buying and collecting it from farmers.

Question: Some foreign media say that the aid Ethiopia gets from international finance institutions and developed countries is going to be stopped. On the other hand, as we see in many instances, Ethiopia has become a beneficiary of huge debt relief. Aid is also coming in, please explain these two different issues and while at it, if aid and the like are terminated, do you think we can go on our own? Related to this, some international communities who say that there are problems in Ethiopia say that Ethiopia should stop the proceedings of the justice system and resort to political solutions to deal with the problems. How do you see these two considerations?

Meles: Regarding the first question, I have also heard people talking about it. Accordingly, there are three things, which I think are basic.

First, we have learnt that some Ethiopians would be happy if the loans and aids Ethiopia gets is cut down, and on top of that there are others who are lobbying donors to reduce or stop their aids and loans to Ethiopia . I think this is not right. Political difference is one issue. But wishing and working for the termination of foreign aid and loan because of those political differences is I think no different from the proverbial animal which said “Let no grass grow after my death.” Therefore, I think this attitude need to be corrected.

Second, when I hear the rumour that the aid has been reduced, stopped, etc by foreign media, to speak frankly, there are times when I thought there may be some truth in them.

On two occasions I contacted the relevant individuals because of my doubts. So far, no one said that they have reduced or stopped the aid or loan. On the other hand, regarding direct budget, there are some who have taken a stand that the forms of the aid need to be changed. The ones who decided that the forms of the aid need to be changed are at the moment designing a mechanism so that the federal government would not use the money. Although the money goes into the federal government treasury, they say it should go down to regional states directly and they are designing a strategy to supervise its implementation. The system of how the money goes to regional states is not that debatable. It would not be a source of conflict with these bodies. The reason that sets us apart from these bodies is the principle. Although we are not against the idea of the way the budget aid goes directly from the federal to the regional governments, we firmly are against the reason behind it.

The justification they give is that the measures the government has taken cannot let them continue the direct budget support as it was in the past. And, they have taken a stand. We don’t think their stand is correct and appropriate. We believe it is wrong, distorted and unfair. Our development partners, and we therefore, have a wide difference regarding how the decision was made. However, we don’t have a meaningful difference in the decision. Whether the direct budget support is channeled to the national treasury or to state governments, its ultimate purpose is for development. In fact, most of the budget provisions of the government is executed by regional states. It is even inevitable that we channel our budget to states let alone foreign aids. We don’t have thus that much difference in the content of the decision. But it should be underlined that we have marked differences in the manner the decision was made. In our view, we don’t believe that the rational behind the decision was correct and appropriate.

These are some major issues regarding foreign developmental assistance. In short, I don’t know, aid reduction or aid cut. Some have changed the system by which aid, loans and direct budget support are provided. We have differences in the manner the decision was made not in the decision.

Regarding the question whether or not we could live on our own is a situation where we were aware and took into consideration in our development endeavours in the past. It is important here to note what we experienced during the Shabean aggression.

Many governments and development partners reduced their aid in higher quantity when we took measures to defend ourselves during the Shabean aggression. From then on, we have been working in considerations of the unexpected challenges until the Eritrean case had got lasting solution. We have been also making necessary preparations for long and for any unexpected challenges thinking that the development partners would take similar measures.

At this time, having made necessary preparations, we are able to cover all our regular expenses from our own. We are at a level where we are the ones who cover the major parts of our capital budget. We have reached therefore at a level that irrespective of the challenges we encounter, our development programmes and regular activities will not be interrupted. This does not mean that if foreign aid is withheld, it would not all at all interrupt any kind of development activities. When more finance is available, it is possible to implement more activities. Even now it is inevitable for us to do our level best so that the flow of aid and loans will continue. Being this as it may, we are now at a level where we are able to make our major and regular activities free from conditions in the outside world. We would also continue to strengthen it in the future.

Regarding the decision of the government to rule the case of the violent CUD leaders by the justice system, various bodies including some foreign governments have made a stand that the case should not require court ruling but political decision. We differ over this stand. Our position is clear. The basis of democracy is the rule of law. Democracy is unthinkable without the rule of law. Utmost efforts were made to bring about political solution for these persons.

Dialogue was held where agenda items were established for engagement. We made several announcements that we were at the eleventh hour that we wanted to avoid risks and so on. All those efforts to avoid the danger were futile—they instigated the violence. We have made thus our firm stand that the rule of law must be respected, as it is the basis of democracy. There should not be therefore political interference with the justice system.

The other bodies including our partners have a stand that the case requires political solution. As we believe that their stand is incorrect, it means that, we will continue in our stand with the rule of law.