Experts at Access Capital, a well-known economic research firm in Ethiopia, were taken by surprise when they learned about yesterday’s 20 percent devaluation of Ethiopian currency exchange rate.

In an analysis released today, the firm said: ” The magnitude of the adjustment is a big surprise, not least because most macroeconomic indicators did not show a need for a sharp devaluation at this particular time.”

IMF, on the other hand, came out in favor of the devaluation, saying, “it will help bolster Ethiopia’s competitiveness.” In June this year, the IMF recommended a 10-percent devaluation of the birr.

The following is a summary of Access Capital’s analysis:

In a very bold and unexpected move, Ethiopia’s central bank devalued the Birr by 20 percent on September 1, 2010. The magnitude of the adjustment is a big surprise, not least because most macroeconomic indicators did not show a need for a sharp devaluation at this particular time.

Given the apparently little justification for a large devaluation from a short-term macroeconomic perspective, we see more longer-term and structural motives for the authorities’ actions. More specifically, we think there is now a conscious effort to experiment with a deliberately undervalued exchange rate (the “China Model” one might call it) and to pursue a more aggressive strategy of import substitution. Both these efforts can be seen as being in line with the main objectives of the authorities’ recently released draft Five-Year Growth and Transformation Plan.

The impact of the exchange rate adjustment will be quite adverse for several segments of the business community, but most of the encouraging trends observed with the steady depreciations of the past year—strong export growth, slower import growth, and improving foreign exchange availability—will all be reinforced.

Looking ahead, we think that after a nearly two-year period of rather sharp movements in the rate, economic policymakers will henceforth seek to provide an extended period in which the Birr rate is relatively stable and predictable. Thus, despite the authorities’ demonstrated ability to surprise, we would venture to say that the regular monthly depreciations of the past will be discontinued from here on and that the exchange rate will stay within a very narrow range for the coming year.

Click here to read the full report.

As the struggle to excise the Woyanne cancer that is eating away at Ethiopia moves to a new stage, Ethiopian opposition groups must take care not to repeat the same mistakes in forging a new, vibrant alliance. Thorough preparations and earnest discussions must precede any formal dialogue, according to Ato Sioum Gebeyehou, a management consultant and adviser to Ethiopian Review.

Ato Sioum makes the following presentation borrowing some ideas from the recently published paper by Prof. Getatchew Haile titled ሁሉንም ሞከርነው፤ የቀርን ክተት ነው (hulunem mokernaw, yekeren kitet naw – We tried it all; What’s left is armed resistance) to help Ethiopian opposition groups forge a solid alliance that can deliver them victory. Click on the image below to see the presentation.

(Ato Sioum can be reached at [email protected])

Several attempts by Ethiopian opposition groups to forge a viable alliance during the past two decades have failed with disastrous result for Ethiopia. The alliances start to unravel soon after they are formed. The main cause of such failure has been lack of advance preparation, according to Ato Sioum Gebeyehou, a senior nuclear power generation engineer and management consultant. The opposition parties also fail to involve all stake holders, such as civic groups.

Ato Sioum comes up with a 4-step process that calls for fractious opposition groups to be united behind common issues and shared interests if there is to be any chance of bringing about regime change in Ethiopia. The 4-steps  include: 1) Prepare to dialogue, 2) Dialogue to dialogue, 3) Dialogue for a common goal, and 4) Achieve the goal.

Click the image below to read the full presentation on the Process of Dialoguing: