“There are lies, lies and implausible lies,” to
quote Meles Zenawi, the dictator-cum-economic spinmeister of Ethiopia. Last
week, Zenawi told a snickering Parliament a story that is the equivalent of the
proverbial bull that gave birth to a calf (or in Amharic “bere
welede”): “We will be seeing an economic growth rate of 10.1
percent this year, while inflation will fall to 3.9 percent. This is the result
of sound economic policy.” (Sorry, but this is the result of voodoo
economics!)
For the past several years, Zenawi has been making hyperbolic
claims of economic growth in Ethiopia
based on fabricated and massaged GDP
(gross domestic product) numbers, implying that the country is in a state of
runaway economic development and the people’s standard of living is fast
outstripping those living in the middle income countries. In March 2009, for
instance, Zenawi’s bragged that he expected the Ethiopian economy to grow
by 12.8 percent. The International Monetary Fund (IMF) disagreed in the same
month stating that given the global economic crises Ethiopia could expect only about
6% economic growth. Zenawi dismissively countered those who pointed out
the discrepancies: “We have differences with the international financial
institutions when we predict our economic growth, but we usually agree on the economic growth statistics at the end of each
year.” The questions remain: Did the Ethiopian economy grow by 12.8
percent in 2009/10? Could it be expected to grow by 10.1 per cent in 2010/11? Who
is keeping track of the economic statistics?
The Central Statistics Agency (CSA)
and the “National Accounts Department of the Ministry Finance and
Economic Development” are the two institutions in Ethiopia that are responsible
for keeping track of the statistical data and providing analysis on economic
performance. But neither organization has the institutional capability to collect
reliable and accurate economic data, let alone assemble complete and
comprehensive data sets which could serve as empirical bases for economic
prognostications. This fact was emphatically stated on March 24, 2010 in the official
statement of Paul Mathieu, the IMF team leader who, after conducting an evaluation of the current half fiscal
year economic performance of Ethiopia,
said: “Statistics collection of the
country requires transformations, and we advised the government to do that.”
Translated from “diplomatese” into ordinary language, Mathieu’s
statement makes it plain that the statistics and data generated and used by the
regime to describe Ethiopia’s
economic performance and make predictions are basically “cooked
up.” The simple fact of the matter is that the statistics buttressing
Zenawi’s exaggerated claims and projections of stratospheric economic
growth, vanishing inflation and red-hot performance of key economic sectors originate
from seriously flawed, massaged and deficient economic data cooked up in the
kitchens of the two institutions for whom the IMF recently prescribed “transformations”.
Zenawi’s stated claims of multi-year runaway GDP growth taken at face value defy not only economic
realities but also common sense. On March 4, 2009, the IMF reported that Ethiopia’s
economic growth could slow to 6 percent in 2009 based on objective factors rooted
in the global economic slowdown and specific trends in the critical foreign
exchange earning sectors in Ethiopia such as coffee exports (with decreased
demand and a 19 per cent decline in price), tourism and transportation, and depreciation
of effective foreign exchange rates by 30 percent. The IMF also indicated that Ethiopia has
the highest inflation rate (26%) in Africa
outside Zimbabwe.
In its April 2010 “Background Note: Ethiopia”, the U.S. State
Department reported an average inflation rate (FY 2008-2009) of 36%. There is no IMF (or any other credible
multilateral institution) year-end or any other report which indicates that Ethiopia
could expect a 12.8 or 10.1 percent economic growth or a decline in inflation
to 3.9 percent in 2009/10 or any other subsequent year. Indeed, IMF’s
Mathieu stated on March 24,
2010 that “non-food inflation remains close to 20 percent, and
has been rising in recent months.” The
claim that “we usually agree on the economic growth statistics at the end
of each year” is simply not true.
In the above-referenced report, the IMF further presents GDP growth data given to it by Zenawi’s
regime for 2005/06 at 11.6 percent and 11.4 percent for 2006/07. The IMF uses
its own “estimates” (without fully disclosing its methodology given
the fact that IMF staffers are allowed considerable latitude in
incorporatingcountry-specific
circumstances in making estimates) to make additional GDP
growth projections for 2007/08 at 8.4 percent, followed by 6.0 percent for
2008/09; 6.5 percent for 2009/10; 7.5 percent for 2010/11; 7.5 percent for 2011/12
and 7.5 for 2012/13. The discrepancy between the IMF’s and the
regime’s estimates appears to reflect the IMF’s clear lack of
confidence in the regime’s economic data and analysis.
All of the statistical fairy tales about the economy told in
Parliament were a source of puzzlement and amusement for Mr. Bulcha Demekssa,
the leader of the Oromo Federalist Democratic Party (OFDM) and former vice-minister
of finance and senior official at various international institutions. Mr.
Bulcha asked Zenawi in Parliament how such fantastic GDP
figures could be achieved: “The prime minister and the government have
repeatedly said Ethiopia
has grown by 10 and 11 percent. The prime minister and Ethiopian economists know
that it is a miracle for Ethiopia
to grow by 11 percent. How is it that Ethiopia grew by 11 percent? We
know that China,
South-Korea are registering such economic growth. But we are confused how Ethiopia
’s economic is growing like these countries. Our unemployment and poverty
is on the rise.” Zenawi’s response was characteristically evasive,
and he denied any real discrepancies: “We have differences with the international financial institutions when
we predict our economic growth, but we usually agree on the economic growth
statistics at the end of each year.”
The answer to Mr. Bulcha’s question, of course, is
obvious. Magic! All one needs to achieve an 11 percent growth is to invoke the GDP Spirits and recite to them the right
incantations about “sustainable development”, “export-led
growth” and “improved export revenue sector”. Then sprinkle a
palmful of that fine IMF gold dust and command: “Shazam! Let there be
economic growth of 10.1 percent! (or 12.8, does not matter any number will do).
Abracadabra! Inflation, I command you to go down to 3.9 percent (or 1.1).”
But the real “miracle” occurs when the magic wand is waived to
deliver economic growth to a precise tenth of a percentage point such as 10.1 percent
instead of merely 10.
All of the economic swagger and wind-bagging about
unrivalled economic boom, prosperity and progress comes from a regime not known
for its economic “literacy”. In an editorial published in the
Economist magazine on November
7, 2006 in the context of the Starbucks coffee row, the magazine was
graphic in its description of the regime: “The Ethiopian government, one of the most economically illiterate in
the modern world, would do well to take Starbucks’s advice.”
But there is a more fundamental question to be answered: Could
a nation’s economic health be
reduced to a single statistical
summation? Does GDP growth
necessarily mean improved in standard of living?
Zenawi says GDP
is the only measure of economic performance that has universal acceptance, and he
will continue to use it until a better measure comes up. As anyone with an
elementary understanding of economics knows, GDP
has little value in meaningfully understanding a country’s economic
growth, development and prosperity. Its analytical and descriptive value has
been thoroughly critiqued in the economic literature. Suffice it to say that to
claim that an economy grew by an 10.1 percent is like saying
“activity” on city streets increased by 10.1 per cent. The street “activity”
without specificity as to crime, car accidents, pedestrian traffic or other
events by itself is meaningless. Yet for the past few years, the regime has
been trumpeting GDP numbers as
some sort of fetish that definitively explains Ethiopia’s economic growth. The GDP numbers, for instance, tell us
nothing about the enormous disparity in incomes between the rich and poor in Ethiopia. By
overstating economic welfare, GDP
calculations do not tell us the magnitude of environmental damage that is
taking place. GDP is certainly not
a measure of the sustainability of growth, a point repeatedly made in numerous
IMF reports on Ethiopia.
On November
3, 2007, the Economist magazine reported:
The fact is that for all the aid
money and Chinese loans coming in, Ethiopia’s economy
is neither growing fast enough nor producing enough jobs. The number of jobs
created by flowers is insignificant beside an increase in population of about
2m a year, one of the fastest rates in Africa…. The government claims that the economy
has been growing at an impressive 10% a year since 2003-04, but the real figure
is probably more like 5-6%, which is little more than the average for sub-Saharan
Africa. And even that modestly improved rate, with a small building boom in Addis Ababa,
for instance, has led to the overheating of the economy, with inflation moving
up to 19% earlier this year before the government took remedial action. The reasons for this economic crawl are not
hard to find.Beyond the
government-directed state, funded substantially by foreign aid, there
is—almost uniquely in Africa—virtually
no private-sector business at all.
The
IMF estimates that in 2005-06 the share of private investment in the country
was just 11%, nearly unchanged since Mr Zenawi took over in the early 1990s.
That is partly a reflection of the fact that, despite some privatisation since
the centralised Marxist days of the Derg, large areas of the economy remain
government monopolies, closed off to private business. This is where Ethiopia misses out badly.
Take telecoms. While the rest of Africa has
been virtually transformed in just a few years by a revolution in mobile
telephony, Ethiopia stumbles
along with its inept and useless government-run services…. There is no official unemployment rate, but youth unemployment, some experts reckon,
may be as high as 70%. All those graduates coming out of state-run
universities will find it very hard to get jobs. The mood of the young is often
restless and despairing; many dream of moving abroad…. Just as the
government is slowing the pace of economic expansion for fear that individuals
may accumulate wealth and independence, so it is failing to move fast enough
from a one-party state to a modern, pluralist democracy. Again, the reason may
be that it is afraid to.
Zenawi is desperate to show economic development of epic
proportions in Ethiopia
after nearly 2 decades of clinging to power. The fact remains that despite the
incredible claims of economic growth, tens of millions of people are starving
and go without any health care. Millions of young people remain unemployed and
trapped in hopelessness. There is no rule of law and human rights violations
are widespread. Whether or not Zenawi’s regime has accomplished an
economic feat with few rivals in modern history is not a matter of wishful
thinking or public relations. It is a matter of evidence: accurate, complete,
reliable and comprehensive statistical evidence that is systematically and
carefully collected, analyzed and verified. Such evidence can not be invented, fabricated,
manufactured, contrived, concocted or cut from whole cloth. Benjamin Disraeli,
the 19th Century British prime minister said, “There are three kinds
of lies: lies, damned lies, and statistics.” In Ethiopia today,
we are witnessing all three!
