The Macroeconomic Policy Environment and Public Enterprise Reform in Ethiopia

"Macroeconomic stabilization and structural adjustment measures have been taken since October 1992 involving an exchange route adjustment and new fiscal and monetary policies as major components. The new investment, labor and public enterprise laws have been introduced to create new legal and regulatory framework consistent with the objective of moving toward a market economy. As the result of the public enterprise reform, enterprises are expected to operate on a competitive basis. The transition from their current unhealthy status to commercially viable units will be a difficult but unavoidable exercise. An important role is to be played by the macroeconomic environment in which the public enterprise reform is to be effected, which influences the sequence, speed and modalities of the reform. Macroeconomic stabilization will increase the tension and pressure on the already financially strained public enterprises. This paper attempts to trace the likely implications of the exchange rate adjustment and the restrictive fiscal and monetary policies on the public enterprise reform programme."