Ethiopia's economy seen expanding 8.7% in 2021/22 -budget speech

ADDIS ABABA (Reuters) -Ethiopia’s economy is expected to expand by 8.7% in the 2021/22 fiscal year, more than the 8.5% previously forecast, according to an advance copy of the budget speech seen by Reuters early on Tuesday.

Workers sort a working gloves in Pittards world class leather manufacturing company in Ethiopia's capital Addis Ababa, file. REUTERS/Tiksa Negeri

The growth boost will be underpinned by “implementing the ongoing economic reforms and using ample potential of the private sector,” according to the speech, due to be read in parliament later on Tuesday by the finance minister.

The government of Prime Minister Abiy Ahmed is implementing reforms aimed at opening up the state-dominated economy.

These include licensing private operators in sectors such as telecoms that were previously monopolised by state-owned companies, and selling stakes to private investors.

Total spending in 2021/22 will be 561.7 billion birr ($12.95 billion), according to the budget, 1.2 billion birr of which has been allocated to rebuilding Tigray, the northern region that has been ravaged by conflict since November.

The budget deficit is 125.7 billion birr, about 2.7% of GDP.

Ethiopia has so far reprofiled $199 million of debt under the G20 framework, but the speech hinted at more, saying: “Given the debt burden our country has, this is not enough.”

The government has previously announced it will overhaul its external debt - including a $1 billion Eurobond due in 2024 - under the G20 framework to offset the fallout from the coronavirus pandemic.

Fitch Ratings agency said in February that Ethiopia’s government-guaranteed external debt was $25 billion in the fiscal year that ended in June 2020. Of this, $3.3 billion was owed to private creditors, including the Eurobond and $2.3 billion in government-guaranteed debt owed to foreign commercial banks and suppliers.

($1 = 43.3874 birr)

Reporting by Dawit Endeshaw; writing by Elias Biryabarema; Editing by Andrew Heavens, Catherine Evans and Giles Elgood