Ethiopian Economy: Separating Fact from Fiction

Ethiopian Economy: Separating Facts from Fiction

Meles Zenawi's Economic Distortion
For a number of years now, Meles Zenawi, the Prime Minister of Ethiopia, has been claiming Ethiopia's economy has been growing by a double-digit margin of 10% or greater. Zenawi believes if he is transforming Ethiopia's economy at this impressive rate, then this will somehow offset his deplorable human rights abuses, his iron-grip dictatorship, and widespread repression. To his credit, it has given him a pass from most western reporters from writing critical articles and the general consensus among foreign western diplomats seemingly believe Ethiopia's economy has been growing at an exceptional rate even with the fact that there isn't any credible evidence to substantiate this belief.

Yet despite this claim of 10% economic growth or greater for much of the decade, there isn't a single credible multilateral economic institution that supports Zenawi's far-fetched claims. Nearly all independent economic institutions have dismissed Zenawi's claims. For example, William Wallis of the Financial Times recently pointed out Ethiopia's double-digit growth claims are based on "dubious statistics" and goes on to highlight that development experts seem to believe there's a trade-off between growth and civil liberties, hence why they continue to shy-away from being critical of Zenawi's widespread human rights abuses.

In Ethiopia, the same is almost true but with a disturbing caveat. It is an open secret that the double-digit growth of recent years is supported by dubious statistics. Yet the same figures are bandied around by development experts arguing that a trade-off between growth and civil liberties is inevitable.
Financial Times, August 9 2010, by William Wallis

On November 3, 2007, the Economist Magazine dismissed Zenawi's double-digit GDP growth claims and suggested it was likely around 5-6%.

The government claims that the economy has been growing at an impressive 10% a year since 2003-04, but the real figure is probably more like 5-6%, which is little more than the average for sub-Saharan Africa. And even that modestly improved rate, with a small building boom in Addis Ababa, for instance, has led to the overheating of the economy, with inflation moving up to 19% earlier this year before the government took remedial action. The reasons for this economic crawl are not hard to find. Beyond the government-directed state, funded substantially by foreign aid, there is--almost uniquely in Africa--virtually no private-sector business at all.
Nov. 1, 2007, By Arba Minch, Economist

Moreover, during Ethiopia's coffee disagreements with Starbucks, the Economist described Zenawi's administration as being: "one of the most economically illiterate in the modern world...". If that wasn't bad enough, In 2010, Oxford University, in collaboration with the United Nation, ranked Ethiopia as the 2nd poorest country on Earth, which contradicts the primer's claims of transforming the country's economy and bringing many Ethiopians out of poverty.

Even though reputable economists regularly dismiss Zenawi's claims of a runaway double-digit economy, Zenawi has kept perpetuating this dubious claim by citing IMF officials in charge with economic forecasts for sub-Sahara Africa. Although the IMF never stated Ethiopia's economy had grown by double-digits, they nevertheless have been the most generous with their "estimation" forecast figures than the rest. This is largely due to the fact that the person in charge of IMF's sub-Sahara economic forecasts is an Ethiopian named Abebe Aemro Selassie. Prior to getting his job as the assistant director of the IMF sub-Sahara Africa department, Mr. Selassie was working for the Ethiopian Government. This self-serving economic forecasts, in which one former Ethiopian government employee at the IMF takes Zenawi's claims and slightly modifies it and gives it crediablity has been going on ever since Mr. Selassie obtained his job at the IMF in 2004. Despite this major conflict of interest for Mr. Selassie, he has never been questioned by any reporter, nor has anyone questioned why a former Ethiopian Government employee would head the sub-Sahara African economic forecasts department and not be able to see this as being a major conflict of interest for Ethiopia.

Abebe Aemro Selassie - Ethiopia

Abebe Aemro Selassie is an Assistant Director in the IMF’s African Department. He currently heads the teams working on South Africa and the Regional Economic Outlook for sub-Saharan Africa. Before joining the IMF, he worked for the Government of Ethiopia. IMF-Direct

As the Economist and other reputable economic institutions have suggested, Ethiopia's GDP has been growing at around 5-6% since 2006 and not the exaggerated and dubious 10-15% Zenawi has claimed. But even taken this 5-6% GDP growth at face value isn't beneficial, as it neglects that Ethiopia has the highest inflation in Africa; which currently stands at 40%. It also doesn't factor into account over 2.3 million Ethiopians are born annually, which strips away any marginal economic growth the country could of had. Zenawi's failure to tackle the population explosion is a ticking time bomb waiting to happen. At the current rate of population growth, Ethiopia's economy would have to run just to stand still.