IMF Warns Depriving Private Sector Unbalances Development

Jan Mikkelsen, Country Representative of the IMF
Jan Mikkelsen, Country Representative of the IMF

Advises government to slow down public investment, maintain tight monetary policy.

Addis Ababa, Ethiopia - An expanding public expenditure coupled with the government’s tight monetary policy, intended to bring inflation down to single digits, could imbalance macroeconomic development by depriving the private sector access to credit and foreign currency, warned the International Monetary Fund (IMF).

These government actions, said IMF resident representative, Jan Mikkelsen, put the private sector under pressure, which will slow down economic growth and employment creation. Mikkelsen was speaking to local and international journalists at a press conference at the IMF office on Africa Avenue, on Thursday, February 14, 2013.

Anti-inflationary measures that were undertaken by the government since mid-2010 were against the advantage of the private sector, a macro-economist who spoke to Fortune anonymously said; supporting the IMF representative’s point.

The policy response to tackle inflation has always been subjected to sharp differences between IMF and the Ethiopian government.

Ethiopia experienced the second highest inflation in the world in August 2011, when the year on year inflation stood at 41.3pc. The level of inflation, which remained one of the highest in Africa until February 2012, started to go down at an increasing rate from March 2012. It fell from 32.5pc down to 12.5pc in January 2013.

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