Laying the Fiscal Basis
Street, Jennie, African Business
Over the last year, Eritrea has introduced a new currency, the nakfa, and is both overhauling the Central Bank, and reorganising the tax and customs departments. African Business' Jennie Street interviewed the Minister for Finance and Development, Ghebreselassie Yoseph.
African Business: Eritrea has no national accounts as yet, and no national budget. What is being done about this?
Ghebreselassie Yoseph: We've been working on that for some time. The transparency issue doesn't worry us, because we have always stressed that all institutions, not just the public sector, must produce audited accounts. We have not achieved the position of an annual budget, but all expenditures are approved and have ceilings.
In terms of transparency, firstly, our people are aware of our political, social and economic objectives, and secondly programmes cannot be translated into reality without the will of the people. In the last three months all cabinet ministers have been holding public meetings to explain policies and objectives in their sector to the people and explain what the people are expected to do, and taking questions.
AB: You recently launched the nakfa. What plans do you have to maintain its value?
GY: The most important element is the strength, growth and dynamism of the economy -- we're trying to guarantee this by realising external and domestic investment. In terms of the foreign exchange stability, our posture for economic growth is targeted at exports to guarantee price stability.
AB: You are restructuring the Central Bank. What is this intended to achieve?
GY: We think a dynamic modern economy cannot exist without a viable full service financial sector. At present the financial sector is not adequate. Our role is to be proactive in the development of a healthy financial sector, assuring price stability and a positive balance of payments position. This means the financial sector must serve the domestic market and have external dimensions. We are not restructuring, but developing the Central Bank to be competent in all aspects.
AB: Remittances from abroad amounted to $139m in 1996. What is the figure for 1997 and is this level likely to grow?
GY: They are a very significant proportion of our income, probably around $200m. We think that with the improving investment climate they will expand satisfactorily.
AB: What is the current balance of payments situation?
GY: Our current balance of payments position is not in credit because of massive development importation. Somewhere down the line the balance of payments will come into credit as exports expand.
AB: Eritrea was estimated in 1990 to have a per capita income of $150pa. Have incomes risen?
GY: Various estimates have been made, but it is very difficult to make a precise assessment. The general level of people's lives has improved in all respects. Social services have penetrated to areas forgotten in the past. Communications have improved. There is not total transformation, but employment and income-generating opportunities are quite good. Urbanisation is quite high, there is a high degree of mobility and non-farming income is also high, especially in construction. There is new development everywhere -- look at Hargaz (in the western lowlands).
AB: Do you have any system for calculating and including the value of national service and summer work programmes?
GY: This is a good question. These workers help rural development, construction and they are involved in investment. Usually figures for investment quite underestimate the level of internal investment. We have mobilised our domestic resources at community, local, regional and central level. This is not accounted for by the IMF or The World Bank. About 50,000 people will be investing in agricultural development, and most of the cost will be covered by the population at large. In a sense it is cost free. …