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Drought Won’t Hurt GDP Growth Forecasts, Ethiopia Says

FILE - Ethiopian farmers plant seeds in Konso. A drought has created food and water shortages in the country.
FILE - Ethiopian farmers plant seeds in Konso. A drought has created food and water shortages in the country.

Ethiopia has kept its economic growth forecast at 10 percent for the 2015/16 fiscal year despite a drought, its finance minister said, adding it was affecting agricultural areas only and he did not expect to divert resources from the budget to respond to it.

Failed rains during both the spring and summer have had devastating consequences for the Horn of Africa nation, creating food and water shortages. The government and aid agencies say Ethiopia needs $600 million to cope with the crisis.

Although it has some of the highest economic growth rates in Africa, Ethiopia's economy still depends heavily on rain-fed farming, which employs some three-quarters of the population of more than 90 million.

Ethiopia's fiscal year starts July 8.

Reserves help absorb cost of aid

"Regarding the impact on economic growth, the drought-affected areas are peripheral and pastoral communities in the southern and eastern parts of the country," Finance Minister Abdulaziz Mohammed told Reuters in an interview."

Normally, those parts of the country contribute not more than 5 percent to our GDP. On the other hand, we expect harvest to be more this year."

Abdulaziz said the government will not divert funds from other projects in its budget to deal with the drought.

"The government has immediately responded to the humanitarian crisis and so far we have been able to control the impact of the drought," he said. "But we have not yet diverted any resource from our development projects. We have been doing it from our own reserves. We don't expect any diversion."

Donations offered to address crisis

Earlier this week, the United States Agency for International Development (USAID) announced a donation of $97 million for Ethiopia to help feed more than 8 million people in need of aid because of the drought.

It said its support included more than 154,000 tons of emergency food aid to help about 3.5 million people in Ethiopia, including refugees from South Sudan, Somalia and Eritrea.

Aid agencies have said the number of those needing support could to rise to 15 million people by early 2016 after the drought, which has been exacerbated by the El Nino weather effect.

El Nino, which is marked by warming sea-surface temperatures in the Pacific Ocean, causes extremes such as scorching weather in some regions of the globe and heavy rains and flooding in others.

Meteorologists expect El Nino to peak between October and January.

The United Nations has said 350,000 children are expected to require treatment for acute malnutrition in Ethiopia by the end of 2015.

The Ethiopian government said on Wednesday it would start distributing 222,000 tons of wheat this month and plans to import an additional 405,000 tons if the scale of food shortage does not ease.

Addis Ababa has allocated more than $190 million for the emergency.

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    Reuters is a news agency founded in 1851 and owned by the Thomson Reuters Corporation based in Toronto, Canada. One of the world's largest wire services, it provides financial news as well as international coverage in over 16 languages to more than 1000 newspapers and 750 broadcasters around the globe.