Ethiopia: Nationwide housing project puts economy in danger

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Ethiopian Ministry of Works and Urban Development (MoWUD)) this year suspended a number of affordable housing projects across the country with the exception of the capital city, Addis Ababa. Top government officials have said the exercise is to lessen the government’s expenditure and save the economy from further decline.

Fearing the nationwide housing project’s inflationary impacts due to its huge associated expenditure, the government has moved to suspend new constructions for this fiscal year. “We are currently working on unfinished projects, (but we are) suspending all new constructions”, said a source, a top government official, from the MoWUD, suggesting the government’s involvement in the decision to suspend the project.

According to him, the escalating prices of construction materials led to the reversal of budgeted targets as the housing project’s expenditure skyrocketed. To achieve the set targets, the government would be forced to increase its expenditure which could in turn have a macro economic impact. Commenting on the appropriateness of the suspension, he confirmed that the housing project fovoured the hikes in prices of construction material.

The ambitious low cost housing plan, first introduced in 2004 during former Addis Ababa Mayor Arkebe Equbay’s term in office, sought to construct 50,000 houses on yearly basis in the capital. The project was first halted due to the outcome of the 2005 election that saw Arkebe voted out of office as mayor. The ruling party, however, appointed him to his current position as state minister of MoWUD after which he obtained government permission to initiate the low cost housing programme nationwide.

In 2005/06, the Federal Government launched its Integrated Houses Development Program (IHDP) under the direct supervision of Arkebe with the aim of constructing 400,000 houses in 70 towns. Until the last Ethiopian fiscal year, a total 24 billion birr budget directed to the project had seen 36 towns in the country benefit from some 61,000 affordable houses.

Addis Ababa, has been excluded from the suspension of the nationwide housing project as neither the federal government nor the Addis Ababa City Administration are directly involved in the financing of the city’s housing project, the official said.

In the meantime, the city’s administration has recently denied budget to its Housing Development Office while recommending the office to transfer finished houses and reinvest the funds obtained from the transfer. The programme is currently expecting a 1.2 billion birr loan from the Commercial Bank of Ethiopia (CBE), one of the investors of the housing project.

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