Press Release: Press Statement by IMF Managing Director in Addis Ababa, on July 7, 2003

July 8, 2003

The following Statement to the Press was made by Horst Köhler, Managing Director of the IMF in Addis Ababa on July 7, 2003.

"My two-day visit to Ethiopia has provided me with a valuable opportunity to see for myself the challenges faced by the people of this country, and to discuss the economic situation with a wide range of people, both in government and within civil society.

"In my meetings with Prime Minister Meles, Finance Minister Sufian and the economic team, I welcomed the government's decisive actions to deal with the immediate effects of drought. The international community also played a critical role in helping Ethiopia face this difficult situation. Following a decline in real GDP growth in 2002/03 as a result of the drought, GDP is expected to increase by over 6 percent in  2003/04, assuming a normal crop year. The government has also decided to adopt structural and lasting measures to ensure food security in the future.

"The government is making considerable progress in tackling poverty. The share of government spending going towards the social sectors and poverty reduction has been increasing. In fact, under the IMF-supported Poverty Reduction and Growth Facility program, poverty-reducing spending more than doubled as a percentage of GDP over the last three years, rising from 8 percent in 1999/2000 to close to 18 percent in 2002/03.

"Nevertheless, we agreed that many challenges lie ahead. Ethiopia is one of the poorest countries in the world, and I discussed with Prime Minister Meles and the economic team measures that could, with the assistance of its development partners, help Ethiopia make progress towards the Millennium Development Goals (MDGs), and in particular substantially reduce the prevailing level of poverty. We agreed on the need to ensure high sustainable agricultural growth rates, and to foster the role of the private sector.

"The government has adopted a comprehensive Poverty Reduction Strategy that aims at achieving a 7 percent real GDP growth rate consistent with the New Partnership for Africa's Development target. Although ambitious, this, or even a higher rate, should be achievable provided the pace of structural reforms is accelerated, financial sector reform deepened, and the climate for private, domestic, and foreign investment greatly enhanced to contribute to job and income creation.

"Ethiopia remains one of the Fund's most important countries and I am happy that we have a very good relationship. Ethiopia's efforts to reduce poverty are being supported by the IMF through a three-year arrangement under the PRGF, in an amount of US$140 million. In November 2001, Ethiopia reached the decision point under the enhanced Initiative for Heavily Indebted Poor Countries (HIPC), with debt relief estimated at US$1.9 billion. I see a good prospect that Ethiopia will reach the HIPC completion point in early 2004 and thereby contribute to debt sustainability. In this context, I also urge donors to provide much needed assistance to Ethiopia, and for new assistance to be, as far as possible, on grant terms.

"Thus, I come away impressed with the Government's commitment to dealing with the many challenges faced by the country. I also welcome Ethiopia's commitment to peace in the region. For our part, we remain committed to assisting Ethiopia create the conditions that will result in sustained and equitable growth and poverty reduction."


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