| Abstract: |
Ethiopias economy has been hit by a series of internal and external shocks
over the last few years. The combined effect of the Covid-19 pandemic, the
Russia-Ukraine war, domestic conflict and drought have put the country on a
lower growth trajectory. Capital investment has plummeted. Budget deficit and
Balance of Payment(BoP) deficit have widened and its external debt position
has been on high risk of distress. The country has put austerity measures to
meet its international debt obligations. Debt servicing is taking a toll on
important social and economic sectors. This can be seen by the crowding out
effect of debt servicing over other sectors. Ethiopias budget for servicing
public debt in 2022/23 exceeds the combined budget for health, education,
water and energy, agricultural development, trade and industry. The budget for
servicing public debt in 2022/23 is three times larger than the previous year.
As a result, the country is sliding backwards from the important economic and
social gains of the previous two decades. Poverty rates are rising. Moreover,
Ethiopias performance towards achieving the SDGs has been poor and ranked
144th among 166 countries. Given a multitude of external and domestic shocks
Ethiopia has been going through, it would benefit from a new special drawing
rights (SDR) allocation or rechanneling of excess SDR. However, given the
sheer size of the current liquidity crunch and financing needs for its long
term recovery, a new allocation based on the current IMF quota would only be a
small fraction of the countrys needs. |