Business
Rapid growth in Ethiopia may reflect positively on the Birr in 2015
By Jeffrey Cavanaugh
Early last month Ethiopia marked a remarkable milestone in its history. Thirty years ago the country was in the grip of a deadly, mostly man-made famine caused by civil war and government mismanagement.
As the Marxist regime fought for control of the countryside in a war that it was ultimately going to lose, media reports from the stricken country showed hordes of refuges and children with stricken bellies scratching out a bare existence in overwhelmed aid camps. Such was the country’s plight that it became the subject of the original offensive Band Aid song “Do They Know It’s Christmas?”
How things have changed. On December 4th, Ethiopia’s inaugural Eurobond issue raised US$1.0 billion from investors, paying in the process the relatively low yield of 6.625.
By way of comparison, Ethiopia is paying what copper-rich Zambia is paying for its notes and less than a full percentage point higher than what neighboring Kenya, which has a much larger economy, is paying for the US$2.0 billion in debt it issued earlier in 2014.
Indeed, as the Financial Times pointed out at the time of the sale, the remarkably low rate was similar to what developed countries were paying as recently as 2000.
This success for Ethiopia is sourced from two places. First, Ethiopia has been the fastest growing economy in Africa for the past ten years, averaging according to the International Monetary Fund’s (IMF)’s numbers an average rate of growth of 10.9 percent over the past decade.
This is quite a record and means Ethiopia has now been growing faster than China, which last saw growth in excess of 10 percent way back in 2010, for several years now.
Of course, much of this is due to Ethiopia starting from such a low starting point – it is one of the poorest countries in Africa and poorer countries tend to grow very quickly when growth begins – but it is also due to conditions generally getting better within Ethiopia itself.
Still, Ethiopia’s success is not entirely self-made.
