Monday, March 21, 2011

Ethiopia: Imports decline for first time in ten years

Capital, By Pawlos BeleteMonday, 21 March 2011
Ethiopia’s import growth rate declined by one percent in the first six months of this fiscal year compared to the same period last year, for the first time in more than a decade.

According to a report released by Access Capital for the first time in more than ten years, Ethiopia’s imports are not showing any growth this year. Total imports in the first six months of the fiscal year (July-December 2010) dropped by 1 percent compared to the same period last year; non-oil imports showed an even larger decline of 3 percent during the same period.

In comparison, since the start of the period of strong growth in 2003/04, import growth has averaged 25 percent per year.

According to the report, the decline is unusual for the Ethiopian economy at this particular time of strong and broad based economic growth. The report attributes the reason behind the decline to both monetary and exchange rate policy which is evident from the combined effect of the credit cap imposed on banks and the sharp devaluation of the birr against other major foreign currencies.

Despite the recent slowdown, the relative role of imports in the Ethiopian economy has been on a steadily rising trajectory for the last 25 years, doubling from around 13 percent of GDP in the early 1980s to 28 percent of GDP last year.

The country’s import-to-GDP ratio is now at a level that is not much different from countries such as Kenya, Uganda, and China. In absolute terms, Ethiopia’s annual import of USD 8 billion ranks it as Sub-Saharan Africa’s 7th largest buyer of foreign goods, hence making the country among the largest markets for exporters around the world seeking business opportunities on the African continent.

The commodity composition of Ethiopia’s imports is dominated by fuel (17 percent of total imports), machinery (11 percent), metals and related materials (11 percent), vehicles (eight percent) and electrical materials (seven percent) and food grains (six percent).

With respect to the origin of Ethiopia’s imports, China, for a fifth year in a row, became the largest source of Ethiopia’s imports (18 percent), followed by Saudi Arabia (13 percent mainly reflecting fuel imports), India (8 percent), the United States (6 percent), Japan, UAE and Italy (with the latter three each providing five percent of total imports).

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