By Eyob Asfaw

The Sunday night of the date- July 28 was different for Ethiopians living elsewhere within its boundary; especially for the urban elites who access the media and can easily resonate what was said.  On that date, the government unusually released a communique on which announced the macro-economic reforms, including its u-turn policy of foreign exchange liberalization. Henceforth, some commentators and analysts used to reduce the reform as a mere foreign exchange policy per se, other than a complete set of macro-economic policy.  Notwithstanding the criticism over the government surrenders for the Britton Woods Institutions as an impulse for desperate demand for forex currency, once has to look meticulously where the surfing macro-economic reforms are heading to in terms of  bringing social justice, regulating free riders,  ending poverty and taming hyper-inflation. Be that as it may, this piece will cover a snapshot overview that pinpoints on how best anchoring the recent macro-economic reforms in the pathways of Sustainable Development.

From the vantage point of pathways of sustainable development, SDG- 1 ( end poverty in all its forms) and SDG-8 (Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all) have a close connection to the recent macro-economic reforms. In its nature, macro-economic reform is a local plan which is not yet sufficiently embraced as a specific goal in SDGs. Exceptionally, SDG 17.13 stipulated:  ‘enhance global macroeconomic stability, including through policy coordination and policy coherence’.  In pursuant to SDG 17.13,  the national ten year plan of Ethiopia has specifically, nevertheless, sought to have coherence and integration with SDGs.  Therefore, policy coherence is one scheme of anchoring the surfing macro-economic reforms.

Nevertheless, the people and the business community are looking for a preacher who eloquently explains the economic forecast.  By and large, the rule of the game introduced by this new forex through floating ought to be understood well by economic man to positively regulate its economic behavior. In resonance, I remember an encounter in which an old enough guy once upon a time suddenly yelled to bless youngsters; ‘Let the price of teff go down now by the divine intervention of God!!’ referring an Ethiopian staple crop whose price hiked due to inflation by then.  Understandably, the blessings shows how an ordinary economic man in Ethiopia do not know even what inflation means since it is unlikely to see price decrease in an age of hyperinflation  To his ignorance, I heard an expert was sharing his opinion: ‘ Demn! This forex liberalization resulted all of a sudden the money stock at the bank immediately inflated overnight’.  In contrary, we learnt that such opinion is erroneously forwarded, resulted precisely from misunderstanding what was going on. Arguably, inflation in the past was, and currently is, not a disease per se. Notwithstanding inflations’ multifaceted nature as a viral disease, the consuming community alike sometimes seems to develop an immunity through constant co-habitation with inflation. In the course of this surfing macro-economic reform, real devaluation are nor appearing coincidently the moment forex market liberalized.

In his counterparts, the PM explanation during his Q&A session with higher official, can roughly be summed as follows:

“ In Ethiopia, apart from fuel and fertilizer, what is not working on the black market? Including clothing…. Let alone that , when the government gives a contract for construction project( such as road) the contractors submit the price interms the black market account….There is no job in Ethiopia that normally costs 50 Birr for 1 dollar. Everything works in black market currency….The government buys fuel and fertilizers. Apart from that, everything else is determined by the black market.”

In pursuant to his explanation, PM Abiy claims that the reform was not as such currency devaluation rather it can be taken as ‘unification’ of two forex markets ( be it the ordinary and the parallel-black market). On eve of the reform, indisputably, the export sector was highly discouraged than ever. Precisely his entire earn of USD can only be exchanged at the normal rate closer to 57 ETB/USD. Nevertheless, ‘unification’ is not known within the policy and academic circles, the real inflation was already predetermined by the black market before the current forex liberalization. This is not, however, to neglect the worst inflation upcoming. As anti-dote, the worst inflation can be tamed if we record productivity in investment and intensive agriculture through re-doubling efforts of hard working habits.

In fact, the PM Abiy’s characterization on the reforms as bitter pill for the macro-economic malaise could turn out to add a salt into a wounded injury of the poor. A yearlong economic hardship can’t be underestimated for someone who can understand multi dimensionality of poverty. It has be remembered that the 2023 UNDP report underscored 68.7 percent of the population in Ethiopia are multidimensional poor;  involving nutrition, child mortality, years of schooling, school attendance, cooking fuel,  sanitation,  drinking water,  electricity  and housing assets in the measurement. In resonance, the PM Abiy said: ‘no further implementation if the macro economic reform affects the poor after evaluating in six months.” The questions are : are we going to suspend the fight to end poverty while we pay the price of macro-economic reforms?  How far the safety net scheme of this reform is reliable enough to relieve the deprivation to come? Against this backdrop, beyond the salary increment for low income employees, the government ought to disclose procedures that ensure resilience from the inevitable multidimensional poverty resulted in an age of macro-economic reforms.

As a general thumb rule, however, we don’t have to forget that the defining major goals of macro-economy are economic stabilization, ­ distributional equity, ­ the achievement of broad social goals. Added to that, the Britton wood institution intertwined macro-economic reform within the framework of sustainable development to include financing sustainable development. Furthermore, macro-economic stability indisputably enhances growth prospects, increases employment and incomes and ensures that the right price incentives work to preserve the environment. .This is, however, not to hide the underlying error of the macro-economic reform provokes legitimate skepticism over the IMF and WBs priority for their intent to bring private sector into the forefront of the economy. How the private sector can be a reliable institution for our struggling economy is a question for many of us. In spite of its contribution, some actors in the private sector turn out to be free riders in the middle of abyss in economic recession. Being reduced to the rules of Mercato (largest open market found in Addis Ababa), the bigger private sector is criticized to be operated by business community ruled by the irrationality leading to monopoly and oligopoly. This feature, indeed, will make the Britton wood institutions’ prescriptive forecast about the private sector a null and void. In this milieu, I would like to forward a query: ‘Are we going to beef up a private sector which is impenetrable for tax extraction?’ Often the government laments that, the government couldn’t proportion tax evasion in spite of its potential to fiscal policy. As an analyst, I can say, that is the imminent danger which are facing to and will persist in the months to come.  Against the abovementioned background, the surfing macroeconomic reforms ought to regulate irrational economic behavior which is a chief reason for impoverishment of many.

In short, we need to have the rigor and will to know surfing macro-economic reforms are heading for which eventually it will anchor on the pathways of Sustainable Development.  Be it ending poverty or ensuring inclusive economic growth, fundamentals of social justice ought not to be neglected in an age of fore market liberalization.

Eyob Asfaw (eyob.asfaw@aau.edu.et  ) is staff of Addis Ababa University and currently a PhD student of Sustainable Development at CSD, AAU. His interest includes governance, sustainable development, peace and inclusion.