The Macroeconomic Impacts Of Privatization In Ethiopia A Time Series Analysis

This study attempts to asses the macroeconomic impacts of privatization in Ethiopia usingrnthe data for the 1994-2018 period focusing on the growth, scal, and debt relations. Thernmain objective of the study is to examine the growth impacts of privatization directly andrnin relation to the private sector development and boosting trade oppenes by overcoming thernprevious studies data and methodological problems. After a simple economic growth modelrnof real GDP growth as a function of privatization proceeds, private sector contribution, gov-rnernment debt stock, trade openness, and government consumption, all econometric tests havernbeen conducted properly. All tests directed towards the econometric estimation method of errorrncorrection model to be employed. The correlation analysis of whether privatization is justi edrnby the debt conditionality by the international and multilateral organizations and by the hugernnational budget de cit is computed. It is found that privatization highly and signi cantly cor-rnrelated with a national budget de cit but insigni cantly with debt stock. But it is found arnstatistically signi cant Granger causality running from debt to privatization implying there isrndebt conditionality for privatization in Ethiopia. The empirical evidence suggests that the debtrnstock a¤ects economic growth negatively both in the short run and long run indicating the debtrnoverhang problem of the country which is a possible cause of privatization that does not haverna long-lasting growth impact. The private sector development has found insigni cant to therneconomic growth of Ethiopia as proposed by the privatization program and other policies. Pri-rnvate sector contribution a¤ects economic growth negatively and only signi cant in the long run.rnThe level of international competitiveness measured by trade openness has found a signi cantrnpositive growth impact in the short run and but insigni cant in the long run. This shows therncrucial role of competitiveness in the country. The empirical Granger causality test shows therernis no causality between competitiveness and privatization that could impact economic growthrnby enhancing the e¢ ciency gain. Therefore the positive economic growth impact of competi-rntiveness comes from the country s trade potential and not by the policy of privatization.

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