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Ethiopia devalues currency in competitiveness bid

Ethiopia PM Hilemariam Dessalegm

Addis Ababa, Ethiopia | AFP |  Ethiopia will devalue its currency by 15 percent in a bid to boost demand for its major exports, a state-run media outlet reported Tuesday.

Africa’s second most-populous country is also one of its best economic performers, with the International Monetary Fund (IMF) estimating in September that the economy had grown by 9 percent since 2016.

Fana Broadcasting Corporate reported the devaluation of the birr currency will take effect on Wednesday and is intended to boost demand for the country’s flagging exports, including coffee, leather and gold.

Income from Ethiopia’s top products has dropped in recent years because of low global commodities prices, contributing to a shortage of foreign exchange that has hampered the economy.

John Ashbourne, researcher at London-based Capital Economics, said the devaluation will increase costs of vital imports like fuel and machinery, but will give agricultural exports such as coffee and cut flowers an edge over East African competitors.

“In theory, it should boost the competitiveness of their exports, particularly compared to the Kenyan ones,” Ashbourne told AFP.

One of Africa’s poorest countries, agriculture makes up 85 percent of employment in Ethiopia, though the government is attempting to build up a manufacturing sector to transform the economy.

It has promoted Ethiopia’s low cost of doing business despite concerns over the country’s long-term stability after a wave of anti-government protests that ended last year.

The devalued currency may convince investors to give Ethiopia a second look, Ashbourne said.

“If you were thinking of setting up your shoe factory, or whatever it is, Ethiopia’s advantage is that it’s a low-cost destination. It’s just become a lower cost destination,” he said.

 

One comment

  1. Hmmmm!! Cry my beloved fellow Africans: The merchants of our misery are at it again. If Ethiopians are doing so well, why this business of ‘devaluing’? Do you know that it is not the currency that is being devalued but the true worth of Ethiopian labour – (that is relative to European and other Western labour)? Our brothers and sisters worked so hard and so diligently to improve their annual output by almost 10%. Someone else working leisurely, achieving barely 1-3% improvement now says “devalue so that I can pay you less for your unit labour”. This is crazy enough: But worse is the second part: “—- so that you can pay more for my products”.

    This bogey of ‘attracting investors’ on basis of ‘low cost’ is as bogus as it is almost spelt. How do you attract them if capital goods are being made more expensive? Where will they get machinery from? How will the essential infrastructure to ease ‘their’ business be developed or maintained? The ‘devalued’ and impoverished Ethiopians: how will they buy these investors’ products? Besides, show us even one African country that has flourished as a direct result of devaluing its people’s labour.

    A very hurting statement is made: ” —–boost competitiveness —— compared to the Kenyan ones”. Typical ‘Divide and Rule’ strategy but this time ‘Confuse and Loot’. Why should we Africans be focusing on pleasing these western sadist looters? Produce flowers, which most of our hungry people cannot even appreciate, only to sell them cheaper so that westerners can romanticise and mourn their dead!! And we are encouraged to outdo each other in this shameful game —– my foot!!

    Of course it is not entirely the fault of westerners. In fact, an average ‘patriotic’ westerner should not be expected to feel for us. We, especially the ‘elite’ Africans share the biggest blame. We have refused to accept that wealth is created primarily by labour in Agric, in extractive, and in artisanal work. We have jumped the gun and glorified areas which are meant to service or smoothen already existing wealth creative work. Thus, we celebrate things like music (even when it sounds like noise and imitates war), drama, trade, politics etc. At higher level, we look to law, journalism, accountancy, and now even IT usage (not creation!). Uganda’s president rightly or wrongly refers to these as ‘useless’ for his country. But even as we focus on these, we do so lousily (and sometimes stupidly) as not to realise the oneness of our situation on this globe. Thus, we are too happy to cocoon ourselves first in our so called tribes, and then in European-created so called ‘countries’. Ah, chaps, let me stop there – before I cry blood!!

    Pan Africanist – Dr. Eng Kant Ateenyi, Cape Town

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