Gov’t Needs Strong Institutions, Accountability for Successful Implementation of New Monetary Policy: Economists

The government must put in place strong institutions and ensure accountability for the success of the new monetary policy introduced by the National Bank of Ethiopia (NBE), economists told ENA.

NBE has introduced a monetary policy aimed at improving the livelihood of the people, curbing inflation, reducing poverty, encouraging savings and investment as well as creating jobs.

Thus, the previous 70/30 share in foreign currency transfer for exporters engaged in key export businesses, especially in manufacturing, has been improved to 50/50.

This means commercial banks will deposit 50 percent of the total foreign exchange earnings at the National Bank, 10 percent at the banks, and the remaining sum in their accounts.

Furthermore, the interest for emergency loans that banks take from the National Bank of Ethiopia is raised from 16 to 18 percent.

Also, direct loan allowed to the government must not exceed one third of the amount given in the previous fiscal year.

The policy envisions lowering inflation to less than 20 percent by 2016 Ethiopian fiscal year (EFY) and below 10 percent in 2017 EFY.

The economist and consultant Dereje Dejene told ENA that it is important to introduce new monetary policy that improves livelihoods and boost the economy.

It is essential to continuously revise and improve the monetary and fiscal policy of any country, he said, adding that continuous improvement in both monetary and fiscal policies helped China and Vietnam to have huge economies, he noted.

According to him, Vietnam and Ethiopia had same economy some 30 years ago. The secret of the rapid economic growth of Vietnam is the sustained improvement in fiscal and monetary policy.

A Senior Economic Researcher at the Ethiopian Economists Association (EEA), Abule Mehari said the revised monetary policy will help to particularly control inflation.

The ceiling for domestic credit is limited to 14 percent and this will limit the expenditure on assets and limit the circulation of cash thereby contributing towards reducing inflation, he elaborated.

The economists further emphasized the need for accountability alongside implementing the new monetary policy.

It is important to control and drain black-market while encouraging and recognizing loyal businesspersons, Abule added.

The researcher also indicated that the government needs to give due attention to service providers and build their capacity, in addition to giving focusing on agriculture and manufacturing.

Source: Ethiopian News Agency