The International Monetary Fund is to push Ethiopia to increase bank rates to counter real interest rates which are deeply in the negative due to the inflation rates.
Real interest rates are negative noted Jan Mikkelsen, Ethiopian Resident Representative of the IMF. The IMF mission making a visit to Ethiopia on the 4th of June will counsel the government to increase interest rates as a monetary policy option to sustain the growth registered over the last years he said.
Ethiopia has achieved significant economic growth and poverty reduction as well as being able to improve physical and human infrastructure in the last several years noted Mikkelsen. Resources generated by the development have been invested to enhance education, health and other infrastructure which is expected to achieve sustainable growth according to Mikkelsen.Issues that can affect sustainable growth such as that of inflation will however need to be addressed he added.
The annual inflation rate is down to approximately 25% at this point but this is still high and food inflation should at least come down to 10% before the headline inflation can become manageable opined the IMF representative.
The IMF mission will discuss the need to reduce inflation in line with the general program for development and poverty production with Ethiopian policy makers. It is expected that the mission will suggest tighter monetary and fiscal policies, contingency plans and the continued implementation of structural policies to reduce price sensitivity to shocks in agriculture explained Mikkelsen.
Source: The Reporter
