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Ethiopia: Prime Minister Hits Out at IMF

BBC
September 1st, 2003

Ethiopia's prime minister has hit out at continuing pressure from international financial organisations to push forward the country's privatisation process.

In a speech to an investors' meeting in Addis Ababa, Prime Minister Meles Zenawi said the repeated recommendations to sell off loss-making state corporations was counter-productive.

"The International Monetary Fund (IMF) has been pressing the government to sell all these state firms, but we have resisted these measures which would result in the collapse of our businesses," Mr Zenawi said.

Ethiopia has sold off part of some state enterprises, including 30% of the main telecoms operator.

But the country insists that the government needs to keep a stake in developmentally important utilities such as communications, power and water.

If it failed to do so, officials say, the utilities might not take development fully into account, charging too much or concentrating only on urban dwellers at the expense of the large rural population.

Falling out

Ethiopia and the IMF have been in a state of periodic disagreement since the mid-1990s, when the IMF suspended its lending programme to Ethiopia saying that its economic policies were irresponsible.

At the time, both inflation and the budget deficit were under control.

But like many developing countries, Ethiopia depended on international aid for much of its budget, and the IMF was worried that this could dry up, leaving the economy in tatters.

It also objected to a decision to repay a commercial loan early, despite the government's insistence that doing so would reduce the country's debt outgoings and reinforce the budget.

Another source of disagreement was the country's reluctance to liberalise its capital markets, a decision the government defended because its farmers - hard-pressed after frequent punishing droughts - needed reliable credit rather than highly variable market rates.

The argument was eventually resolved after pressure from World Bank insiders, and lending was restored.

The IMF approved a $190m (121m) loan for poverty reduction programmes in 2002, and agreed an emergency loan of $14.3m in August to combat the latest drought.





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