Ethiopian papers seek urgent financial rescue package for economy

December 7, 2008

AD]Addis Ababa, Ethiopia – Ethiopian newspapers during the week focused their attention on the modalities to sustain the country’s emerging capital markets and saving it from the potential failures that might result from client companies failing to successfully take off.

Ethiopia’s largely unstructured capital market regime, which has allowed several private ventures to raise public funds for business start-ups, requires urgent government attention if its growing trend is to be sustained, Ethiopia’s business weekly, the Fortune, said.

In a debate inspired by the current financial crisis facing the west, mainly a result of private companies and former state monopolies failing to make profits, Ethiopian newspapers examined the country’s financial system in details and pointed a few flaws.

“Perhaps, it has been one of the major drawbacks of subsequent governments in Et hiopia that they mostly react to situations. Instead of remaining proactive, being reactive, they still tend to take quite a long time before they realize certain situations need their response, a response, in most cases, no other actor can give,” the Fortune editorialized.

In a series of stories examining the state of the economy, local newspapers, including the state-run Ethiopian Herald, the sustenance of Ethiopia’s economic growth was given front-run play, with the government paper praising recent reforms in the financial sector.

The Herald reported that the country’s financial system, though still in need of major reforms, had achieved certain milestones, including achieving a stable exchange rate regime and availability of credit and land for business expansion and new ventures.

The state newspaper quoted expert opinion as saying that better developed financial markets were critical in helping a country to attain a certain level of national savings, which could then be used to finance the most productive sectors of the economy.

In a story, headlined: “Efficient financial system, cornerstone to expedite growth,” the Herald reported that Ethiopia’s financial market is rapidly growing with credit advancements to the private sector having expanded by an average of 20 per cent.

According to the paper, five new commercial banks are expected to enter the market soon while the eight existing commercial banks have managed to expand their branch networks over the years, amassing some 495 branches across the country over the past three years.

Ethiopia, though still lacking the financial sophistication that exists in Africa’s elite economies like Egypt, Tunisia, Morocco, Nigeria, South Africa and Kenya, is rapidly growing with at least 28 micro-financial institutions now operation a l in the country.

The picture painted by the state papers differed excessively with the editorials written this week by the private newspapers, which mainly discussed the challenges facing the country’s financial system in terms of regulation and sophistication.

“As old as the history of the capital market coming to the business might be, it has not made any progress, one of the earliest share companies had been Ras Hotels Enterprises — state owned – was established in 1948, after more than half acentury, it is only with the introduction of the commercial banks in the early 1990 that the share market (capital market) has seen some significant take off,” Fortune said.

In an opinion article, headlined: “Capital Market cart needs state push,” the weekly paper said the central bank must go out to strongly structure the capital market, noting that so far, only the banks and the insurance companies are effectively regulated.

“This wing of the economy, from which the largest population of the developed countries is benefiting from, is certainly a resource for the government to benefit itself and a significant part of the public, if fostered with proper regulatory frameworks,” it concluded.