The International Monetary Fund advised the Ethiopian government to to make more credit available to private businesses to boost employment and build on its economic gains.

While the country's government-led development model has improved lives and expanded the economy, public enterprises that are involved in building more houses, dams and factories are draining banks of loans, Ethiopia Representative Jan Mikkelsen told reporters in Addis Ababa.

“The private sector is struggling to get credit for its projects and that’s a problem for economic growth and job creation,” he said on June 5.

Economic growth in Ethiopia, Africa’s second-most populous nation, is expected to slow to 6.5 percent in the 12 months to July 7, the end of Ethiopia’s fiscal year, and next year, according to the Washington-based lender. Annual growth averaged 7.7 percent in the previous three years, it said. In the last fiscal year, 68 percent of non-government loans went to state-owned enterprises and that ratio increased to 81 percent in the nine months to February, Mikkelsen said.

Ethiopia’s “capital constrained” economy cannot meet all credit demands, State Minister of Finance Abraham Tekeste said. Loans are available for companies in priority areas including export-oriented manufacturing and agriculture, he said.

The government is trying to increase the amount of credit for industry by boosting “domestic resource mobilization” and promoting foreign investment, according to Abraham.

Source: Bloomberg