By Hailegebriel Endeshaw
ADDIS ABABA – (BORKENA) – Ethiopian Government has taken about 100 billion birr from National Bank as direct advance payment in six months, sources said. The Amharic Weekly Reporter said that the government has taken a loan of birr 40 billion as direct advance payment in the second quarters of 2015 Ethiopian Fiscal Year. Together with the 60 billion birr direct advance, which the government has borrowed during the first quarter of the budget year, the total amount reached 100 billion birr, according to Reporter.
It is to be recalled that the direct advance payment taken by the government in 2014 Ethiopian Budget Year was 76 billion birr. Comparing this with the direct advance payment of the current budget year, there shows a rise by 32 percent.
As indicated in the second quarter report released last week by the Ministry of Finance, the three-year total direct advance payment (taken by the government) rolled back to this day, which was 236.5 billion birr has turned into a long-term bond. Accordingly, the total amount of the long-term bond loan taken by the government has increased to 433.9 billion birr, the report said. Similarly, the 187.2 billion birr direct advance payment taken by the government in 2012 Ethiopian Budget Year has turned into a long-term bond pushing the loan to 199.2 billion birr. Though the government cleared the loan at minimum rate in 2013 and 2014 Ethiopian Fiscal Year, the total rate taken has remained 197.9 billion birr by the end of 2014 E.C
Deputy Chief Governor of the National Bank of Ethiopia, Fikadu Degiffe, told the Reporter that the direct advance has turned into a long-term bond. The payment given to the government this year is the largest of all advance payments released previously.
The Ethiopian Government allocated 786.6 billion birr budget for the current Fiscal Year. Minister of Finance and Economic Development, Ahmed Shede said while presenting a report to the House of Peoples Representatives that of the allocated budget, over 300 billion birr deficit was expected. Ahmed raised the issue of utilizing sales of treasury bills, direct advance and other alternatives to fill the budget deficiency.
In order to supply direct advance payment (loan), the national bank is obliged to print money. This means the amount of ‘money’ should be increased or rather new money is created to supply the loan or the advance payment. However, the fact is that printing more money and releasing it into the market will never increase the economic output. Of course, it increases the amount of money, which is circulating in the economy. The principles of Economy teach us that if money is printed, customers are able to demand more goods. Printing too much money, where there is no boost of goods in the market, surely creates an uneven playing field for demand and supply. This undoubtedly pushes up prices of the goods.
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