An International Monetary Fund (IMF) team, led by Bhaswar Mukhopadhyay,
held discussions in Asmara from May 13–22, 2019 on the Article IV
Consultation with Eritrea, the first such discussions in 10 years. At the
conclusion of the mission, Mr. Mukhopadhyay issued the following statement:
“Eritrea has just emerged from twenty years of conflict with Ethiopia and a
decade of sanctions imposed by the international community. The war and
then international isolation deprived the country of vital investment, trading opportunities and
external support, and have left the economy in a difficult situation. The
peace agreement with Ethiopia and lifting of international sanctions
provide a welcome opportunity to build an impetus for economic development
and to begin implementing much needed reforms.
“The information base of economic developments in Eritrea has deteriorated,
and the conditions prevailing in the country have given rise to data and
capacity constraints. Nonetheless, the mission received useful information
to better understand the macroeconomic situation and capacity development
needs in Eritrea.
“Eritrea’s economy is dominated by agriculture and mining and is highly
vulnerable to shocks. Most of its population is engaged in rain-fed
subsistence agriculture, which is exposed to repeated droughts. Data
estimates show that GDP fell sharply in 2017, driven by the regional
drought. Real GDP growth is expected to have recovered in 2018.
“In recent years, policies have tried to adapt to the difficult conditions
prevailing in the country. A sustained period of high fiscal
deficits—reversed over the past three years—has led to a heavy public debt
burden, the banking sector is vulnerable and foreign exchange is scarce.
Notwithstanding such economic pressures, the Eritrean authorities have made
remarkable progress on some development goals, notably in the health and
education sector, and prioritized public investment in the earlier years.
“Looking ahead, the near-term outlook for real GDP growth is challenging
due to the tight fiscal situation and existing restrictions on economic
activity. Over the medium-term prospects for a pick-up in growth are
promising, including due to new mining projects coming on stream. Policies
to restore the health of the fiscal and financial sectors will be central
to ensuring macroeconomic stability and broader economic reforms will help
to deliver inclusive development.
“The mission team expresses its gratitude to the authorities for their warm
hospitality and the productive discussions. The IMF stands ready to assist
the authorities in the implementation of their economic policies, including
through the provision of technical assistance, and looks forward to
continuing the policy dialogue.”
The mission met with the Minister of Finance, Minister of Health, Minister
of Tourism, the Minister of National Development, the Minister of
Agriculture, the Acting Central Bank Governor and other senior government
officials as well as representatives of the banking sector and
international partners.
