Capital market helps to sustain Ethiopia’s economic growth: Scholars

Addis Ababa, 29 December 2014 (WIC) – Economic scholars said Ethiopia’s debut exercise at the capital market by issuing a 1 billion USD sovereign bond will help it to sustain the economic growth.

The scholars whom ENA has interviewed asserted that it will have positive influence on the economy by strengthening the financial system, attract more foreign direct investment, increase role of the private sector and get additional hard currency.Dr Tasew woldeHana, an economic lecturer at Addis Ababa University, a state-owned institution, told ENA that the economic growth witnessed over the past 10 years has resulted in huge demand for capital, energy, communication facilities and other infrastructures among the public.

Underlining the fact that meeting this growth driven demand requires huge sum of money, the capital market could be an alternative source of finance.“Failing to meet this demand will create a difficulty in keeping the momentum of the economic growth” Dr Tasew said.According to him, injecting huge amount of money to the infrastructure development will have good returns, since infrastructure is a backbone to the whole economic activity.

As the government decided to utilize the money on infrastructural programs, he pointed the importance of the decision by indicating that the county needs to improve its infrastructure facilities as it is at the initial stage in this regard and doing that will better off the economic performance.

According to Dr. Demelash Habte, an economics lecturer at Unity University, a private institution, capital market provides good opportunity to create efficient, effective and organized financial system and sustain economic growth.

In the long run, the capital market will create an opportunity to the private sector to secure funds for their projects thereby become an impetus for the growth.

The finance secured from the capital market will add energy to the consecutive economic growth of the country, noting that growth came so far using limited resources.

Noting that lack of resources were the major reasons for development projects to lag behind the plans, Dr Demelash said this new financial resource will help the government address challenges related to finance.

Joining the capital market, the government can now enhance the economic growth by establishing an investment bank and introduce an organized stock market, he suggested.

For his part, Senior Macroeconomic Expert Dr Eyob Tesfaye said the capital market will help to change the country’s economic dependence on import-export trade, bilateral and multilateral grant or loan.

He said it will also provide a good opportunity for Ethiopia to attract more foreign direct investment, in which the country is working at to strengthen its economy.

Ethiopia’s Prime Minister HaileMariam Dessalegn has disclosed last week that the finance secured from the capital market will be used to fund construction of new sugar factories and industrial zone.