Addis Herald
  • Home
  • History
  • Africa
  • Travel
  • Music
  • Culture
  • Art

Culture

  • calanderEthiopia: A truly unique African country
  • passionfruit-istanbul-croppedPassionfruit’s Globe-Trotting DJ Mixes Tell Stories Through Disco
  • Ethiopia-HighlandsThe most breathtaking geography in Ethiopia
  • Christmas in Lalibela‘Genna’: Christ’s birthday anniversary, an indispensable part of Ethiopian culture
  • the weekendThe Weeknd’s Next Album Will Be Inspired By BLM Movement, COVID-19 Pandemic

Business

  • cashgo appAbyssinia Bank Launches Mobile Remittance App
  • East Africa HoldingEast Africa Holding & China West International Holding’s joins to build $ 2.2 Billion Cement Factory in Ethiopia
  • siemensEthiopia Signs Deal To Build Phase 1 of $440 Million Assela Wind Farm Project
  • EthiopiaCan agriculture be Ethiopia’s growth engine?
  • Orange-Digital-VenturesGIZ and Orange launch an Orange Digital Center in Ethiopia, the 3rd in Africa and the Middle East region

Africa

  • Aleksandra-Sova-Cardano-1-1200x600Cardano: The “birds” are late – Hoskinson addresses project in Ethiopia
  • MaskEntrepreneursCAR5 ways women are driving Africa’s transformation and contributing to a global reset
  • jad20210225-culture-nefertiti-akhenaton-592x296-1614265493-e1614766131609Ancient Egypt’s Queen Nefertiti & King Akhenaten finally in a photo
  • 20140208_MAP001_0Africa’s manufacturing puzzle: Evidence from Tanzanian and Ethiopian firms
  • battle of adwa woriorThe Victory of Adwa: A Fresh Perspective
937d7d0846ff07b32d0fc10cd0bda566_XL
August 8, 2018

Ways to unleash Ethiopia’s financial resource

Although mobilization of domestic resources has been improving steadily in Ethiopia, declining share of domestic revenues with respect to GDP has shown stress over the past few years, according to government officials and economists.

Various experts state that the level of domestic saving in Ethiopia has been low, leaving the sustainability of the country’s encouraging growth vulnerable to availability, access, and conditionalties of external resources. The cause and ways to address the issue is the focus of this news piece.

Talking to The Ethiopian Herald, Alemayehu Geda, Professor of Economics at Addis Ababa University, says that the poor performance in terms of domestic resource mobilization comes down to a long time running the deficit on the side of public saving. This is the case because public expenditure has always surpassed what the government collects from taxes and from other domestic revenue streams like public enterprises such as ethio- telecom etc.

Also, he adds, in terms of private saving, increasing interest rate in banks does not trigger saving in Ethiopia’s case. “What trigger saving in private household in the country’s case is an increase in average income, which has not really increased, and if it did, it went to few people, despite the country’s impressive economic growth in relation to Africa.” For instance, if National Bank increases interest rate in the hopes of mobilizing saving, it would be a loss at it would not bring any change, he elaborated.

Thus, in order to bolster national saving, and help the country attain the achievable potential in mobilizing financial resources, the Professor suggests short and long term solutions.

“In the short term, I recommend expanding mobile banking”, he suggests before adding how the huge expansion in banking branches of commercial banks in the past few years has enabled the bank to successfully mobilize (domestic resources), and especially the saving in the rural areas.

“Given that setting up banking branches is more expensive than mobile banking, I recommend working on expanding the latter as it affords us the same service whilst putting the money longer for the banking system to use it. Buying, selling, or trading through your mobile means that the money will be still there in the banking system while you are able to do with it whatever you want.”

Arguing that expansion of mobile banking can present short term solution to the issue of domestic resource mobilization, Alemayehu points out something like Safari, Kenya’s mobile payment system, which provides the majority of the country’s with banking access.

But, the long term solution to it is increasing income, he opines. To this end, he says, bringing in inclusive economic growth is important, as economic growth without inclusive income distribution is pointless. “To bring this, increasing the productivity of the agriculture sector, and building on the labor intensive manufacturing area the government initiated is the way to go.”

Finally, he points out domestic resource mobilization will be pointless without including foreign exchange generation as part of the package. “Raising domestic resource is important and crucial, of course, but it would not be fully effective if it is not laced with improving our foreign currency saving and export performance.”

Ethiopia imports 70 percent of the goods it needs, so, even if we save huge amounts, it would still not be enough, as we need foreign currency to bring in the goods we need. Thus, we should be working on saving foreign currency as well by bolstering our import substitution, among other initiatives, he concludes.

There are many factors to consider when talking about low saving for Atlaw Alemu (PhD), Economic Lecturer at Addis Ababa University, like demographic factors, dependency-ratio in a society, but most importantly, he believes the fact that labor price being low discourages saving, and addressing this issue will not only help enhance private saving, but it is also a way to narrow income gap.

He believes boosting the businesses sector can serve as a way to bolster domestic savings. With this in mind, he mentions creating the conducive environment for start-up businesses to flourish. He suggests further simplifying, the process, rules and regulations so that entrepreneurship takes off, which is great for the economy in not only encouraging saving, but also in creating job opportunities for young graduates.

He argues this would give people and young graduates, the impetus to save and utilize whatever resources they have on various business ventures and creating jobs. It would also help people minimize expensive festivals, marriage and other extravagant festive culture in the country, according to him.

The other is the tax system. Atlaw says that the tax system should further be improved, and be more fair to the business community, and transparent on what it is used on along with awareness creation on the societal benefits and values of taxpaying. Such initiatives will help further increase tax compliances, and broaden the tax base, he stresses.
Eyessuswork Zafu, Chairman of Board at United Bank, for his part cites that the country’s economic growth has been achieved mainly through public investment, and nurturing the private sector is the optimal way to increase the saving rate in the country. “It is through the private sector that it is possible to increase domestic savings.”

Zafu states that so far the private sector was not that much the centerpiece of the Ethiopia’s growth narrative, but in recent times the sector is being given bigger push so that its full potential will be unleashed. And I believe that our saving will get to perform better in parallel to this, he concludes.

BY ROBEL YOHANNES

Source Ethiopian Herald

Ethiopia’s Strong Engagement on Land Restoration shows real change on the ground The Unintended Consequences of meddling with Ethiopian Politics and Religion, a few lessons from history

Related Posts

cashgo app

Business, Headlines

Abyssinia Bank Launches Mobile Remittance App

East Africa Holding

Business, Headlines

East Africa Holding & China West International Holding’s joins to build $ 2.2 Billion Cement Factory in Ethiopia

siemens

Business, Headlines

Ethiopia Signs Deal To Build Phase 1 of $440 Million Assela Wind Farm Project

Industrial Parks Development | Ethiopia |

https://www.youtube.com/watch?v=o-vSnVQfBoo

Africa

  • Aleksandra-Sova-Cardano-1-1200x600Cardano: The “birds” are late – Hoskinson addresses project in Ethiopia
  • MaskEntrepreneursCAR5 ways women are driving Africa’s transformation and contributing to a global reset
  • jad20210225-culture-nefertiti-akhenaton-592x296-1614265493-e1614766131609Ancient Egypt’s Queen Nefertiti & King Akhenaten finally in a photo
  • 20140208_MAP001_0Africa’s manufacturing puzzle: Evidence from Tanzanian and Ethiopian firms
  • battle of adwa woriorThe Victory of Adwa: A Fresh Perspective

Travel

  • Homage to Entoto Park How the Old “Town in the Forest” is turning into a newly flowering tourist hubHomage to Entoto Park How the Old “Town in the Forest” is turning into a newly flowering tourist hub
  • 00ddd3-724x483This Is What It’s Like Trekking the Hottest Place on Earth
  • Screenshot_20200106-034619_GalleryExtreme Ethiopia in pictures
  • Addis-skyline-768x402Enigmatic Ethiopia: Africa’s (still) hidden jewel in the crown?
  • 929-1024x524-488x250Ethiopia’s Tourism sector is on the rise

Culture

  • calanderEthiopia: A truly unique African country
  • passionfruit-istanbul-croppedPassionfruit’s Globe-Trotting DJ Mixes Tell Stories Through Disco
  • Ethiopia-HighlandsThe most breathtaking geography in Ethiopia
  • Christmas in Lalibela‘Genna’: Christ’s birthday anniversary, an indispensable part of Ethiopian culture
  • the weekendThe Weeknd’s Next Album Will Be Inspired By BLM Movement, COVID-19 Pandemic

Business

  • cashgo appAbyssinia Bank Launches Mobile Remittance App
  • East Africa HoldingEast Africa Holding & China West International Holding’s joins to build $ 2.2 Billion Cement Factory in Ethiopia
  • siemensEthiopia Signs Deal To Build Phase 1 of $440 Million Assela Wind Farm Project
  • EthiopiaCan agriculture be Ethiopia’s growth engine?
  • Orange-Digital-VenturesGIZ and Orange launch an Orange Digital Center in Ethiopia, the 3rd in Africa and the Middle East region

RSS Allfrica.com News feed

  • Africa: Diplomatic Dithering Over Western Sahara Bodes Ill for Other African Disputes
  • Africa: The Invisible Generation Holding the Key to Africa’s Future Food Security
  • Africa: 'Time to End the Gender Pay Gap in Journalism,' Says IFJ
  • Africa: Two Cosafa Nations Set for Beach Soccer Africa Cup of Nations
  • Africa: Covid-19 Pandemic Worsening Gender Inequalities for Refugee Women and Girls
  • Africa: Gambia U-20 Eyes Bronze Medal in Africa U-20 Youth Championship
  • Africa: Covid-19 Affects Over 1bn Children's Education Globally
  • Africa: Total Number of Covid-19 Cases Across Continent Nears 4 Million
  • Africa: 'Postpone AFCON Qualifiers'
  • Africa: The World Is Addicted to Coal - It's Time for the Planet to Go Into Rehab
  • Abijitta-Shalla National Park
  • Alatish Ethiopian National Park
  • Awash National Park
  • Babille Elephant Sanctuary
  • Bahir Dar Blue Nile Millennium Park
  • Bale National Park; Ethiopia’s lesser-known Treasure
  • Bale Mountains National Park
  • Borena-Sayint National Park
  • Chebera Churchura National Park
  • Dati Wolel National park
  • Gambella National Park
  • Gambella National Park 2
  • Kafta-Sheraro National Park
  • Mago National Park
  • Maze National Park
  • Nechisar National Park, Ethiopia
  • Omo National Park 
  • The Semien Mountains
  • Yabello National Park
  • Yangudi Rassa National Park
© Addis Herald 2021
  • Contact us
en English
af Afrikaansam Amharicar Arabiczh-CN Chinese (Simplified)en Englishfr Frenchde Germanel Greekhi Hindiit Italianja Japaneseko Koreanla Latinru Russianes Spanishsu Sudanesesw Swahilisv Swedish