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Ethiopia, the second-most populous country in Africa, is experiencing a significant economic transformation. The government has made it clear that attracting foreign investment is a top priority, and they believe that developing a robust capital market system is essential to achieving this goal. But how effective will Ethiopia’s capital market be in controlling inflation and promoting foreign investment?
The capital market is a key component of any successful economy. It provides a platform for companies to raise funds by issuing shares of stock, bonds, or other financial instruments, thereby increasing their capital base. This, in turn, allows businesses to expand their operations, invest in new projects, and create jobs.
One of the main advantages of a well-functioning capital market is that it helps control inflation. When companies have access to financing options other than borrowing from banks, it reduces the pressure on the banking system. This, in turn, allows banks to lower interest rates and make credit more accessible to businesses and individuals. With increased access to capital, companies can expand production, which helps stabilize prices and control inflation.
Ethiopia’s capital market has the potential to contribute to curbing inflation. The country has launched its first-ever stock exchange, the Ethiopian Securities Exchange (ESX), which commenced operations in 2020. The ESX aims to provide companies with a platform to raise capital through the issuance of shares. By diversifying financing options and reducing reliance on bank loans, the ESX can mitigate inflationary pressures and bring stability to the economy.
Furthermore, the development of a capital market can attract foreign investment. Foreign investors often prefer to invest in countries with well-established capital markets as it provides them with transparency, liquidity, and regulatory oversight. Ethiopia, with its large market and growing economy, can become an attractive destination for foreign investors if it develops a thriving capital market.
A well-regulated capital market also instills confidence among investors, including foreign entities. Ethiopia’s government has implemented various reforms to improve the business environment and encourage foreign investment. These reforms include easing restrictions on foreign land ownership, simplifying bureaucracy, and strengthening investor protection laws. By complementing these reforms with a robust capital market system, Ethiopia can create an environment conducive to foreign investment.
Nevertheless, challenges lie ahead for Ethiopia’s capital market. Developing the necessary infrastructure, such as a comprehensive regulatory framework, market surveillance systems, and investor protection mechanisms, will require time, resources, and expertise. Additionally, educating the public and potential investors about the benefits and functioning of the capital market is crucial to ensure widespread participation and market growth.
In conclusion, Ethiopia’s capital market holds significant potential in controlling inflation and attracting foreign investment. By diversifying financing options for businesses, it can help stabilize prices and curb inflationary pressures. Additionally, a thriving capital market can create an environment conducive to foreign investment by offering transparency, liquidity, and regulatory oversight. However, developing a successful capital market will require concerted efforts from the government, regulatory bodies, and market participants. With the right policies and adequate infrastructure, Ethiopia can harness the power of its capital market to drive economic growth, attract foreign investment, and improve the livelihoods of its citizens.
This is beyond inflation. I know what inflation looks like in states, but this is an economic depression. Everything is not affordable for basic survival. All the young generation have lost hope of growing. I've been in addis 2 weeks before, and it's very discouraging for any hard-working middle and low class society to live there.
I was sad that every young person out there wants to migrate to other countries despite the risk. I'm personally discouraged to make any investment in there also. I am very disappointed with the system. Being educated is pointless there, since the salary can't even barely quarter of the rent unless you steal or something.
The chance of succeeding in Ethiopia is null from my observation!!!!
No civil servant have a profound right. Most private civil servant are forced to work over time with a basic pay, and the government doesn't intervene.
Ethiopia is a country with no profound rules and the market is not promising at all right now. I hope and pray God helps the society during this sad time. It's a country with an average salary of 5000 to 10000 birr but the average expense is minimum 15000 birr and above. Everything looks very hopless right now. The country is only viable for rich investors not for median salary society
What an amazing interview.
ምን ሆነ የአባይ ቦንድ?
ይህ አክሲዬን ወሬያቸዉን ትተዉ ቢጀምሩትሰ
ዲጅታይዝድ አርገወት ኦክሲዬኔን ወጣ ወረደ በደንብ የምቆጣጠር ከሆንኩኝ ለመግዛትና ለመሸጥ ቀላል ከሆነ ምን አሰጠበቃቸዉ
በነገራችን ላይ ቪድዬ አላይም ኮሜንት ብቻ ነዉ, የምሰጠዉ
Are you kidding? The government bond today offers a 12% interest rate. But even microfinance banks already offer a 12% interest yield for savers. So, if the government bond wants to be competitive, they should provide at least a 15% or higher interest rate.
U guys are illusionist, in the country no peace what kind investment ur talking about. U sounds dumb!!!!