Embassy of The Federal Democratic Republic of Ethiopia

Prime Minister Meles Zenawi's Interview

Q: How much is the power shortage affecting the economy? What shall we expect next year?

PM Meles: Significantly. Already the estimate from concerned authorities on Ethiopia's growth this year has been reduced by more than one per cent to 11.2pc of the GDP; initially they predicted that the economy would grow by around 11.2pc.

The electric power shortage does not affect agriculture, but it does affect the service sector and industry, thus their respective growth rate has to scale down. Our hope and expectation is that this problem will be overcome this summer. We have already completed a dam [Tekeze], which is ready to go as soon as there is enough water.

The tunnel of Gilgel Gibe II has been completed and what remains to be done is finalizing and clean up the natural mess created when you try to dig a tunnel of about 27Km. This clean up operation will take perhaps a month or a two. The water is already there in the dam of Gilgel Gibe I and therefore we should be able to generate electricity as soon as the clean up operation is completed.

Q: Recently power rationing included exporters which have confirmed orders.

PM Meles: It will have some significant negative impact on the growth of the economy, particular in the industry and service sectors. That has already been included in our projection for this year.

Q: I understand that your administration, this time around, has differences with the IMF over a couple of issues, the growth outlook for the current year being one. I understand that IMF is willing to revise its growth projection from 6.5pc to seven per cent, but it also requires you to review your growth projection from the 10.2pc you just mentioned.

PM Meles: I did have the opportunity to talk to the IMF team before they left. My understanding is that there are no significant differences between us and the IMF. Of course, their projection of the growth of the current year is significantly different from ours. They think our economy will grow faster than they initially had thought, but lower than what we are claiming. This is not an academic debate; all of us will know it soon because all the figures will be in by September.

Their projection for next year's growth is also slower than ours; it does have implications because among other things, for example, monetary targets are usually based on these growth projections. We have agreed to disagree on the projections and agreed to agree on the financial plans. Although we have a different projection for the next year, we have the same figures as far as the monetary targets are concerned.

Q: Your administration always takes pride for having a budget deficit that is much lower than what the European Union imposed on its member countries, which is less than three per cent of the GDP. The IMF feels that this is somehow understated because it does not include what the government has as a debt through the state enterprises such as the power company and telecom, and most importantly the city government, which has the [borrowing] from Commercial Bank of Ethiopia (CBE). The IMF would like all this to be included in the budget deficit in which case, it obviously will increase the budget deficit per GDP.

PM Meles: Budget deficit and public debts are not categories that we have invented; they are universally accepted, including by the IMF. A budget deficit is exactly what it says, a shortfall in the budget of the government.

Some people have a different or larger category called public debt, where they include debt by state owned enterprises. That is a debatable category; some people argue that to the extent that these are state owned enterprise but operate, in the same manner as the private companies then they should be considered as being in the private sector. Particularly from the point of credit, others argue otherwise. We have agreed with the IMF that we will deal with these two issues separately; we have two sets of targets. One deals with the budget deficit which is expected to be about 1.5pc in the coming year, and debt incurred by public enterprises which has also been a target has been set for this. We are agreed about both these targets.

Q: Although the IMF seems happy with the depreciation of the Birr, they require you to further depreciate it, for they believe that it still makes import very cheap and exports very expensive. Although there will be some risk of inflationary situation, they would still like you to depreciate the Birr.

PM Meles: Our views and the IMF's views on depreciation have been more or less identical for more than a year and half now. We both agree that the currency should be valued properly through the market mechanism. We both agree that our currency has appreciated in real terms as a result of the inflation; and both agree that this needs to be corrected in a manner that does not stock the inflationary spiral out of control.

We have set for ourselves specific targets based on common positions; these specific targets agree with the IMF delegation. The IMF delegation does not make its final decision in Addis, but reports to Washington and its views have to be endorsed by its management before it becomes policy.

Q: Your administration has taken all monetary policy measures under its disposal in the agreement with the IMF that broad money supply will go down 20pc. But the administration's performance over the last 10 months was not able to achieve that, because data from the National Bank of Ethiopia (NBE) reveals that broad money supply grew last year by almost 23pc to 80.6 billion Br. Don't you think this is one more reason for your administration to be serious about taking fiscal policy measures?

PM Meles: It is not either or; we have to use both, and that is what we have tried to do during the current budget year. Initially, we planned to have a budget deficit of 1.5pc, which later on we revised and reduced the budget deficit to zero. That is fiscal policy extremely stringent by any standard. That has its implications on money growth.

We have also agreed money growth should be less than 20pc this year. The figures that you have for the 10 months of this year coulPRIMEd be accurate, but there are other ways of comparing a 10-month figure. You can compare the month of April [2008] to the month of April [2009], or you could compare April's figure with the beginning of the budget year. In the case of the latter, money growth comes in the range of between 16pc to 17pc. We have space of between three and four per cent in the months of May and June. Our expectation is still that the outturn will be slightly less than 20pc; we are still confident and I have the data for the month of May and the first week of June. It assures me that it is likely to be slightly less than 20pc. I think we have performed well on both fiscal and monetary fronts.

Q: Official reports indicate that revenues from exports for the year are off target by almost one billion dollars. What will be the overall impact on the economic performance?

PM Meles: The export performance of this budget year is likely to be way out of target. Its impact on the economy has already been manifested in the form of the exacerbation of the balance of payments problem that we have faced throughout the year. The problem in the coffee sector was the main reason why our exports performed so poorly. Our coffee exports for the first 10 months were less than last year by about 25pc; whereas coffee prices have not significantly been reduced. On the other hand, sesame exports have shot up in spite of the fact that the sesame price has collapsed when compared to last year. This is a clear indication to me that it is not global prices per see, which is the main problem. It was the marketing challenge we faced in the coffee sector.

Q: Can you brief us on the latest development on the coffee that was seized from some exporters?

PM Meles: Most of it has been sold out and much of it has already been exported. There was a dramatic turn around in the coffee sector over the month of May. We are now confident that the problem we have faced in the coffee sector has now been adequately resolved. Data for the first week of June seems to indicate that the turn around we saw in May is likely to be sustained.

Q: Your administration is about to reclaim plots in Addis Abeba that were not utilized for a few years, after prospective developers took from the city government. But there are issues: There is the economic slow down; the banks are not providing loans; and the city government has been lagging in providing construction permits. Businesspeople in town are complaining that they are being boxed into a situation is not enabling them to pursue their projects, while at the same time the government is pressuring them to do something about their projects or risk the loss of their plots.

PM Meles: As far as repossession [of plots] is concerned, I am sure the city administration will carry it out with sensitivity to the efforts by anybody in terms of implementing their contracts. But, if for example somebody has taken the land 10 years ago and he complaining about repossession on the basis of arguments today, then perhaps the city administrations will be justified to say, "Why didn't you start it seven years ago?" It is not like investment or construction activities have stopped in Addis. The data seemed to indicate that the construction sector is still alive and kicking. The current challenges would not necessarily explain all of the shortfalls on the parts of some of these investors.

Q: Are there mistakes that you regretted or you took some lesson out of over the past 18 years since you have been in office? Could you perhaps consider the loss of Assab as one of the most regrettable mistakes of your administration?

PM Meles: I have never claimed to be a deity; only gods are supposed to be free from mistakes. There is no question whatsoever that me and my party have made mistakes. We will get into that at a more appropriate time, this is still work in progress and there will be time when we can be evaluated more objectively.

The party does evaluate its performance from time to time. Where it makes major policy mistakes, it publishes both. The issue of the Port of Assab is not one of those mistakes that the party felt it made. As far as my personal contribution in that exercise is concerned, although it goes without question that I have made mistakes as part of that collective leadership and individually, that is something I would be happy to discuss at some future date.

Q: I was going through the interview you gave to the Financial Times where you hinted that you did not agree on the border war with Eritrea. Nevertheless, you were forced to carry out the decision by the majority. Can you tell us what part of it you did not like, after all Ethiopia was forced to launch a defensive war?

PM Meles: There was no difference of opinions in the ruling party with regard to the unprovoked aggression by the Eritrean government and the decision to fight back at the same time when seeking peaceful way out.

But there was a difference of opinion in relation to specific measures taken during the war. For example, I was not personally sure that all the Eritreans who were asked to leave Ethiopia had posed a clear and present danger to Ethiopia's security. That does not mean that none of them were a security threat; I was sure some of them were. With those who were a security threat, I had no problem asking them to leave. I was not sure every one of them did pose an immediate and clear security threat to Ethiopia. There were also a number of differences of opinions about the peace negotiations.

Q: Can we also conclude that your decision to leave office is due to frustrations in carrying out majority decision which you did not like?

PM Meles: There is absolutely no iota of frustration at the moment in me with regards to performance of my duties. I am perhaps more comfortable with my political life than I have been for a long period. If and when the time comes for me to leave my current position, it will be with great satisfaction that it has been the most rewarding experience. Frustration due to carrying out the majority decision has no impact at all; currently it does not exist at all.

I have been a member of a political party most of my life. I was 19 when I joined the TPLF; I have learned how to operate within an environment of organizational discipline, which comes with the territory. All the benefits of having your views accepted and implemented require in return the obligations to live with decisions that you do not agree with. You cannot have one without the other. Even in cases where my views turn out to be the minority view, I recognize that this is part of the game one has to be very comfortable with. If one does not become comfortable with it, then one simply leaves that organization.

Q: I understand that a party discipline requires one to abide by the views of the majority. But do you not you find it very painful and rather stressful to be a spokesperson of that majority’s view and address it to the public as a chairman of that group?

PM Meles: It has sometimes been less than thrilling to represent a majority view that one does not share, especially when such view happens to be a matter of significance. But, it comes with the territory. There is always the option that the Americans say, "If you don't like the heat, you leave the kitchen". If you cannot live with that type of discomfort from time to time, then there is always the option of leaving the organization. But it does sometimes become, shall we say, less than comfortable, although it gets easier if you have done it as long I have done it.

Q: The current instability in Somalia led for the call from the House Speaker of the transitional Parliament for support from neighbouring countries. The Africa Union (AU) has already endorsed this call. What would be Ethiopia's reaction?

Prime Minister Meles Zenawi: I had the opportunity to speak to the President of the transitional government on the phone two days ago, and I expressed Ethiopia's full support for the transitional government.

Our reading of the situation in Somalia and Mogadishu is slightly different from the reading of the Speaker, who seemed to indicate that unless military support was forthcoming in a matter of 24 hours, things in Mogadishu could get out of control. The transitional government is facing a very difficult situation, and the Shabab and Hizbol Islam are supported by hundreds of foreign Jihadists. But we do not believe it is about to be toppled in 24 hours, 48 hours or whatever. We believe there is adequate time for the international community to respond in a reasoned and deliberate fashion.

We support the transitional government in every way we can; and we support statements issued by the Intergovernmental Authority on Development (IGAD) and the Africa Union (AU) in support of the call by the transitional government. We look forward to these entities to make the necessary decision that will make it possible for member states to provide with the necessary assistant. We have no plans, however, to deploy our troops in Somalia. We believe that the deployment of Ethiopian troops would be unwarranted, because we are not yet convinced that this presents a clear and present danger to Ethiopia. If there is a clear and present danger to Ethiopia's national security, naturally, we would respond consistently with the charter of the UN. We would take all necessary and proportional measures which are proportionate to the risk. Our expectation is that we would not be there any time soon.

Q: The Al-Shabab claim that they have 3,000 suicide bombers, originally foreigners but now young Somali boys from the age of 13 to 20. They have expressed strong interest in attacking Addis Abeba and Nairobi, I am wondering about your intelligence findings in as much as you can talk about those.How much of a danger to Ethiopia are the suicide bombers?

PM Meles: That risk has always been there since the early 1990s. It has not gone away and we do not expect it to go away any time soon. No matter what the outcome of the battles in Mogadishu, we do not expect Somalia to be quick enough to eliminate the terrorists operating from inside Somalia any time soon. It is likely to take years. We have to learn to live with it; and we have to learn to manage it. I believe we have learned to live with and manage it. We recognize there is that risk and we are very carefully monitoring all possible terrorist activities in Ethiopia. I have no reason to believe that our security establishment will not be able to manage it.

Q: What would it take for Ethiopia to revisit [its policy] on Somalia?

PM Meles: No government would say it would never revisit any of its decisions. There may be some unforeseen circumstances that could force us to revisit our decision. But that does not mean that we are about to change our position on the matter. It simply means, it is not prudent for any government, including ours, to completely close off any opportunity for our troops to be deployed in Somalia any time in the future.

We will continuously assess the need depending on whether there is an equally and strongly felt need for such deployment from both the transitional government of Somalia and in Ethiopia. The level of consensus in the international community about how and when to respond will also be a factor. We do not want to find ourselves in a situation where the, so called, Ethiopian horse would be trying to take just chestnut out of the fire on behalf of everybody else and the horse become whipped by every idiot and his grandmother.

But again, I am not saying that we are likely to change our position; I am simply saying no government says "never".

Q: There are a lot of eye witnesses who say that you already have troops inside Somalia in the area of Beletewien operating some checkpoints.

PM Meles: We do not have combat troops anywhere in Somalia, and we do not plan to have them any time soon. We do not have troops stationed in Beletewien. There may be troop movements in and around the border from time to time, and that is what we would expect with the type of border we have with Somalia.

Q: I believe the spokesperson has mentioned that if given the green light by the international community, Ethiopia will consider intervening. Is that the case?

PM Meles: If the spokesman of the Ethiopian government said Ethiopia is willing to reconsider, that is exactly what I am saying. If we feel that the situation in Somalia presents a clear and present danger to Ethiopia's national security, then we would not hesitate to take all proportional measures, including deploying of our troops in a proportional manner.

Q: What do you think is the motivation behind Eritrea's government support for Al-Shabab?

PM Meles: I think the best answer has to come from the Eritrean government itself. All we can do is guess, and there may be three factors.

The Eritrean government does not care with whom it sleeps so long as it destabilizes Ethiopia. It is supporting groups that are secessionist in their objectives as it supports groups that are the exact opposite. Though it does not appear to make sense to me, it makes perfect sense [to them] because the objective are neither the secession nor non-secession objectives as much as it is to destabilize Ethiopia to the extent possible. I would not be surprised if the government would prepare to sleep with the devil to destabilize Ethiopia.

The other motivation could be that they want to attract attention. They feel that they did not get adequate attention from the right sources. I think this obsession with the CIA and the United States in every paragraph coming from Eritrea seems to indicate to me there is an advance case of attention deficiency.

There are also reports that Eritrea has been the main conduit of money from some source to the terrorists. I would not been surprised if the Eritreans were paid - financially or otherwise - for their services of being the conduit.

Q: I would like to know about your recent discussion with the Sudanese Vice President, Salva Kiir.

PM Meles: It was focused on two issues only: The implementation of the Comprehensive Peace Agreement (CPA) and the challenges in that regard, as well as what could be done to address the problems in that respect. The United States is now holding a consultative meeting in Washington D. C. about this specific matter, and the Vice President wanted to explain this to me. I have wanted to understand how he evaluates the implementation of the CPA with assessment of post referendum scenarios in Southern Sudan and Sudan as a whole.

We also discussed on the challenges the Southern Sudanese government is facing in terms of implementation of development projects. They have asked for our support in number of capacity building activities, and we have promised to help him. We had very good discussions, and I think he left satisfied.

Q: The Kenyan delegation which has recently visited the Gilgel Gibe hydroelectric project told a press conference in Kenya that Ethiopia has rejected the proposal to establish an independent committee.

PM Meles: We have no dispute with Kenya on the hydroelectric power project. On the contrary, the Kenyan government would expect us to sell some of the electricity generated from Gilgel Gibe III to Kenya. Indeed, together with Kenya, we are approaching funding agencies to help us build an electricity grid network that would connect Ethiopia to Kenya.

There is no such project in Ethiopia as utilizing the water of the Omo River for irrigation purpose. Gilgel Gibe III project is not an irrigation project; it is a hydro power project. If at some stage in the future we decide we will use the water that is already dammed to carryout irrigation project in Ethiopia, we would do so in a manner that is not inimical to the interests of Kenya or damages the environment around Lake Turkana. We have assured our Kenyan brothers that this indeed is our policy.

But, for somebody to ask Ethiopia to establish some supranational authority to manage the waters of the rivers in Ethiopia, that is an all together different thing; that is overkill. I think the assurance we give them is adequate.

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