Woyane's economic growth: rhetoric vs reality

By Tesfaye Kebede / September 11, 2009
The very common way that Woyane and its agents try to shift the public attention from lack of human and democratic rights and the daylight looting of the country’s resource is by referring to the ‘impressive’ economic development registered in their rule. If they are talking about the only region that they are exclusively devoted to develop they are absolutely right. The reality in other regions of the country, however, speaks quite the opposite. Even if we believe the double digit economic growth that Woyane claims to have registered in the last five years it will be dwarfed by the sky high rate of inflation, the second highest in Africa-the first being Zimbabwe (this actually is a currency collapse).

More signs are appearing not to believe what Woyane says regarding the economic development. That is, the Ministry of Finance and Development recently blamed the Ethiopian Statistics Authority for its inefficiency in providing accurate data. This accusation is long overdue. An authority which can’t determine the number of population (millions of Ethiopians in two regions are still missing and un-accounted) can never be trusted to give us the accurate measure of a relatively complicated matter, growth. At the time when the price of everything was doubling and tripling with in a year the inflation rate instead of being 200% or 300% or even more, the same Statistics authority reported a much less inflation rate. This rate is the basic component in calculating the economic development. That is, in order to determine the change in growth, the value of domestic production has to be discounted at the current rate of inflation. If the rate of inflation assumed in discounting is far less than the actual rate, a country will, wrongly, be considered to have registered a higher rate than the actual. This is how, against World Bank and IMF prediction and the economic reality of the world, which is slowly hitting the third world, that they are telling us the country will register a double digit growth again.

Before the current world financial and then economic crises, mainly due to an increase in oil and food price, inflation was a world phenomenon. With the exception of Zimbabwe, Ethiopia’s official rate of inflation, which is much less than the actual, is no where near comparable to the average rise in inflation as a result of the price hikes in oil and food. At that time Woyanes jumped on the oil and food price hike internationally as an excuse and a justification for rocketing inflation at home. No one denies the fact that oil price, major import of the country, had an impact on inflation. If it was oil then why does inflation keep on increasing while the price of oil has decreased more that half from its peak? Another excuse they present for this is the sticky nature of prices. Yes, prices are naturally sticky; they may not reflect the downward trend immediately, even if the element that caused the increase shows a decrease. But in our case prices didn’t just stick, they kept on increasing despite the significant decrease in the price of oil, which is the assumed cause of the hike. This clearly shows that the fluctuation of oil price doesn’t really explain the inflation.

The effect of increase in food price internationally, another assumed cause, does have very little or no effect on Ethiopia’s inflation. This is because of two reasons. First, Ethiopia, if it ever does, exports a tiny proportion (mainly oil seed products) of its food production. So the degree of the change in the international price of food being translated to domestic price is very low. Second, Ethiopia doesn’t import food products except that is being imported by donors and humanitarian organizations. Even if donors buy the food that they import at higher prices, since they distribute it to the beneficiaries for free it won’t have an inflationary effect on the domestic price. The only time the country imported wheat by purchasing on its own for sale was in a futile effort to contain the inflation they created themselves.

The other evidence that Ethiopia’s inflation is not only, as it was being consistently claimed by the regime, caused by international price fluctuations is the ever increasing price of everything at the time when oil and food price have plummeted worldwide. On his interview on HardTalk Meles, against the fundamentals of economics, has gone as far as claiming that the presence of high inflation in Ethiopia now, at the time when prices are falling all over the world, is a sign for the continuity of strong economic development of the country and an increase in the purchasing power of its people. Let alone the double digit and even more rate of inflation a higher single rate of inflation would be considered as a disaster for any economy. It doesn’t require to be a genius in Economics to understand the impact of inflation. We know how we were better off with the previously low salaries than the nominally high but effectively very low income we all have now. The reality on the ground speaks very loud.

So if it is not as such the fluctuation of price internationally, what then caused the high per inflation? Evidences are emerging that it is actually the making of the regime, which made an irresponsible decision of just printing money, so that they can finance the ever increasing security establishment, provide money directly or indirectly to their loyal supporters and show case an artificial growth. In the aftermath of the 2005 election when donors tightened conditionalities and cut financial support the regime instead of respecting human right in return for money, in an act of complete desperation, ordered the National Bank of Ethiopia, an institution which was supposed to be independent, to get more money printed.

At the time when significant portion of donor financing is cut and in a country where over 30% of its annual budget is financed by donation what could possibly be the source money for the huge public spending and the unexpected salary increase after the election except printing? The huge spending and the sudden increase of salary are meant to win the people who unequivocally showed their support for the opposition. I, being one of the beneficiaries, at least nominally, was not against the salary increase. But, the salary increase had no or little help because the inflation kept on increasing alarmingly. By questioning the source of financing I am trying to address the unexplained main cause of inflation, printing money, and how Woyane through its trading companies profited from the situation and benefited its affiliates

The National Bank of Ethiopia has once proudly reported to have increased the supply of money-printing more-as much as 25% with in a year, without including the huge amount of forged money (there are rumors that those who do such business are connected to high level officials in the security apparatus) the economy absorbs every year. This being an official account sources in the national bank have revealed that the actual figure is much more than that. Printing such amount of money with in a year where there is no comparable level of domestic growth in production is the best recipe for high per inflation.

Speaking of economic development, shameless Woyanes at the inauguration of the new Gotera Interchange Road, here in Addis, the first of its kind in Ethiopia, have claimed it as the sign of the economic development of the country. It is great to have such projects, though the issue of priority may be questioned. But to claim it as sign of economic development is absolutely wrong. They simply forget the fact that it was done by Chinese, who covered all its cost by themselves. This doesn’t show any sign of the countries development, it just simply shows the generosity of Chinese. Trying to take credit for the thing that they have nothing to do with and exaggerating the non-existent or unbalanced growth won’t take our eyes from the real issues. Ironically they also claimed that the road shows the unity and equality of all ethnic groups while what they are tirelessly doing is to disintegrate the country in to pieces and promoting ethnic based inequality.

Even if we believe their rhetoric on the impressive growth there remains the biggest question: who are benefiting from it? The only beneficiaries of an artificial growth are Woyane trading companies and affiliated private investors. When the inflation is as high as it is now in Ethiopia borrowing money from a bank and investing it in any asset will have a great pay off. The logic is simple, as inflation gets higher and higher any physical thing you own will have higher value and the value of money will decrease. This means the money you will pay back to the bank even including the interest will be much less than the amount you borrowed. The question is who have benefited from such manipulation. As we all know Woyane companies and its affiliated private investors have an exclusive access to Bank loans. EFFORT, a Woyane conglomerate, which recently moved its headquarters to Mekelle and literally involved and controls all the key economic activities of the country is the primary beneficiary of such manipulation. Sebhat Nega, the ex CEO of EFFORT and the key behind the scene player of Woyne, in his VOA interview adamantly stated that no entity in Ethiopia has a comparable wealth of EFFORT. He went on saying that it is an organization owned exclusively by the people of Tigray.

EFFORT’s so many sister companies from their inception to present are highly favored by the regime. Any competitors who are involved in similar sectors have suffered a direct influence form the regime. To mention few: There is no hiding the fact that Muger cement factory was forced to produce below its capacity in order to artificially create shortage of supply so that products of Mesebo cement can be sold. It is a well documented fact that commercial bank of Ethiopia is being forced to lend only for those who get their trucks assembled by Mesfin Industrial Engineering- which effectively killed the only private competitor in the sector, Maru Car Assembling company. It is well known how their companies enjoy a tax free advantage over the items they import.

While the majority of the population is getting poorer and poorer every year, minority of the population exclusively composed of one ethnic group and some loyal to them are becoming millionaires overnight. The exaggerated economic development rhetoric of Woyane is un-substantiated for it is not based on facts and is against what is happening on the ground. It is simply a means to cover up the unspeakable atrocities they are inflicting up on the people. The inflation that we ordinary people are suffering from is mainly their own making. Woyane companies and their affiliates, of course, have hugely benefited from the manipulation and exploitation of the very thing that made our life worse and worse, inflation. So this talk of double digit economic development is simply a joke and cover up. If there is any one who has benefited from anything that this regime can provide are its companies, people and region.

Tesfaye Kebede (Sidist Kilo)