Ethiopia loses up to $3 bln worth FDI, loans due to war, says Macroeconomist

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Foreign Direct Investment (FDI), loans and aid flow into Ethiopia registered a reduction of $2 to $3 billion in the initial periods of the war, according to a Macroeconomist.

Tewodros Mekonnen (PhD),  a Country Economist at International Growth Center said Friday that the war has negative impacts on disrupting the Balance of Payments (BoP) through reducing FDI, loans and aid inflows from the developed nations.

The war, which is now in active stage in the northern and northeast Ethiopia has also its own impacts in aggravating inflation stemming from producers failure to distribute their products to main market destinations, he says.

“Attributed to the war, the sectors, which have been registering growth previously, are now showing a reduction of progress,” he said during a Policy Dialogue Forum on Ethiopian Economy held at Ellily Hotel.

The government launched a Home-Grown Economic Growth program in a bid to fix the structural problems of the economy including solving the macroeconomic imbalances.

Tewodros said: “The reform program registered a little progress but the shocks such as war posed a challenge on it.”

In economic terms, solving the problems depends on whether these shocks are exogenous or indigenous, he said, adding, “Challenges such as the coronavirus pandemic, local and Russia-Ukraine war are out of the control of Ethiopian policy makers”.

Implementing import-substitution strategy and enacting state of emergency laws are among the solutions to resist the shocks, he recommends.

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