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DOES FOREIGN AID HELP TO IMPROVE EXPORT ORIENTATION IN ETHIOPIA? [Abstract ID: 0309-01]
Ethiopia is a major recipient of foreign aid, especially since the introduction of the policy changes in 1992. This has been used to raise government expenditure on various productive activities, which either contribute directly to increasing the country’s economic growth (accelerator) and/or to the development of services (multiplier). I view the ongoing efforts by the government on both facets, using aid as an additional resource, as contributing to improved economic growth, though in different ways. Some aid goes purely to development and contributes to the economic progress of the country or its people. Some is strategic and comes with political or economic conditions tied to it, for example imposing certain restrictions if aid is to be disbursed or to continue. This strategy affects the development of the country. The central proposition of this paper is that Ethiopia should start to think critically and analytically about the strategic agenda of donors, and take the economic and political interests of the country into account when responding to aid conditions. Aid dependency should be reduced not because of donors, but because such dependence on foreign aid could substantially affect the country’s macroeconomic performance, for example impairing Ethiopia’s export sector, and could derail the country’s export-oriented development strategy. To back up these policy conclusions, I estimate the relationship between foreign aid (ODA), exchange rates and non-traditional exports using a time series data.