African Development Bank President visits Ethiopia

African Development Bank President Adesina Akinwumi visits Ethiopia and discussed on development related topics with Prime Minister of Ethiopia Abiy Ahmed.

“The two have met on Thursday in the capital Addis Ababa. I am delighted to visit Ethiopia and be with you Prime Minister Abiy Ahmed. I am amazed with the development and transformation of the country & proud of the $1.7 billion financing of the African Development Bank in Ethiopia. Thank you so much for your wonderful hospitality,” twitted Adesina Akinwumi.

Prime Minister Abiy Ahmed on his part also posted on his official twitter page: “My extreme pleasure to welcome to Ethiopia Dr. Akinwumi Adesina, African Development Bank (AfDB) President, Africa’s true son and #Ethiopia’s partner.”

African Development Bank has been one of the major financier of infrastructure and development projects in Ethiopia ranging from road network to electricity projects within Ethiopia and connecting with its neighbors such as, Kenya.

AfDB assessment of Ethiopia’s economy

Ethiopia’s financing requirements are significant given its large physical and social infrastructure needs and low tax-to-GDP ratio, which averaged 10% from 2017 to 2020. The primary deficit plus debt service was estimated at nearly 4% of GDP.

As of June 2020, total public debt was about 57% of GDP, slightly more than half of which was external. Since 2017, Ethiopia has been classified at high risk of public debt distress due to weak export performance coupled with increased import-intensive public infrastructure investments.

Outlook and risks

The medium-term economic outlook is contingent on the resolution of the COVID–19 crisis, the pace of the economic recovery, and such other shocks as civil strife and climate change. Real GDP growth in 2021 is projected to fall to 2%, then recover to about 8% in 2022, led by a rebound in industry and services. Monetary policy is expected to remain flexible in response to the government’s financing requirements.

Increased use of open-market operations is expected to reduce inflation gradually. The fiscal deficit is projected to increase as tax policy reforms are delayed due to COVID–19. The current account is likely to deteriorate in 2021 before improving in 2022 as service exports gradually pick up. The key downside risks to the economic outlook include low investor confidence, in part due to sporadic domestic conflicts, weakness in global growth, and climate change.