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January 16, 2012

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Thanks for this interesting article. However, I do not think the story is over yet.

It is true that Ethiopia is a laggard in many ways, even in comparison with its peers in Africa. Compared to Ethiopia, most African countries now have a very open and liberalized market. Some embarked on the challenge to liberalize and open up their economy as soon as they acquired independence in the 1960's and 1970's. Others submitted to the influence of the World Bank in its structural adjustment programs in the early 1990's. Although the results are mixed, in general this has led to a more diversified and dynamic economic field.

Ethiopia followed a very different path. There were many improvements in opening up in the early 1970's. Foreign and domestic investment was rising, and there was increasing commercialization. However, these changes occurred in a backdrop of a very archaic political environment in which the land-owning aristocracy played a dominant role. The majority of farmers did not own the land they farmed. Needless to say, the country needed change, and was swept by a revolution that overthrew the monarchy in 1974.
Unfortunately, the revolution culminated by the military's control of power. For 17 subsequent years, the self-proclaimed communist junta did nothing but wage wars against a proliferating group of liberation fronts. The neglected economy marched backwards during those years.

The current government came to power in 1991 and opened up the economy once more, but this started to yield results only by the turn of the 21st century. The economic has been remarkably expanding since then. The problem today, however, is the accelerating inflation, which is in double digits since 2008.

I think the lack of central bank independence is the thing to blame for this. As alluded to in the article, the government has the power to squeeze money out of the hands of private banks with little regard to the law. This same power, I believe, has been illegitimately used to print money to finance government deficit. In fact, the major reason the government forced banks to invest on its bonds could be to absorb the excessive liquidity that is its own making. I think the government is still struggling to contain the ravages of inflation which it initiated without fully understanding the dangers involved.

I think you miserably failed to understand about rationalities for independecy Central Bank. Do you have a clue how liberalization/deregualtion by Fed triggered the wave of financial/economic crises? brain washed by imaginary economic models/THEORY? contextualization?

Thanks but no thanks man for meddling. Don`t forget what happened in 2008 in the great USA and whats happening right now in Europe. Deregulation is destroying the countries. So, I do not think its advisable to let the big international banks, which are reasons for the callapse of the world economy, to come to Ethiopia. No no no. Brazil`s great leader Da Silva has said no to the west and made concrete place for his country in the world economy; now every one wants to do business with Brazil. China said no to the western debt driven developement system and is the big driver of the world economy right now. Hadn`t Brazil and China said no to the western system, I am not sure what would have happened to the world economy in 2008. What I know is that China and Brasil were growing when the west was in recession and saved the world Economy. So, my friend before you judge one`s system as wierd (and by implication backward), ask yourself why and learn to apperciate whats different from what you have been indoctrinated-one fits it all aproach.

The corruption is high in Ethiopia, the government printing money to pay for its loyalists mainly to spy the rest of more than 80 million Ethiopians.

The minority Ethiopian regime is a group of ethnic centered families. A guerrilla fighters group how took power some 23 years ago until today.

Hello Great article. Can you give me permission to share it on sodere.com...an Ethiopian social media site?

I have no objection.

Doug M.

Not to nit pick, but the hydropower dam linked to the bond (Renaisaance Dam) has nothing to do with Lake Turkana etc. That's another hydro dam (Gibe 3 Dam)

That's not a nit pick at all. Good to know.


Doug M.

Doug,
Would you say overall that Ethiopian banks are safe entities in which to deposit funds? In your
opinion is there a threat of having deposits frozen or seized? Please email me as well.
Alan

thank you for the information.

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