Statistical data compiled by the IMF refutes Eritrea's claims

These articles attracted the wrath of the Eritrean Government. The Eritrean embassy in Rome wrote an article bashing Reuters, while the Foreign Ministry was assigned the job of attacking the AP.

However, in attempting to discredit the AP and Reuters, the Eritrean government only discredited itself. Many of the statistics they cited in their rebuttals are contradictory and not credible. This can be ascertained by consulting the IMF Statistical appendix for Eritrea.

The following data are from the IMF Staff Country Report for Eritrea (No. 98/91). This data will be used to refute the Eritrean government's propaganda.

1. Eritrean Growth Rate
The Eritrean government claims that its economy grew by an average annual rate of seven percent from 1992 to 1998. But it seems that the Eritrean government is mistakenly using Ethiopia's average annual growth rate as its own. (for the period 1992/93 to 1996/97 as reported in the IMF Statistical Appendix for Ethiopia.)

According to the IMF data, the average annual Eritrean growth rate from 1993 to 1997 was 4.98%. If we add in the claimed 1998 rate of 4 percent, the annual average drops to 4.8%.

Eritrea's self-reported growth rate of 4% for 1998 is questionable. Below are the components of Eritrea's GDP as reported in the IMF Statistical Appendix for Eritrea.

Agriculture.............................9.3%
Industry.................................29.5%
Distribution Services.............38.6%
Other Services......................22.5%

Now which of these sectors exhibited growth? According to Eritrean data reported to the UN's Food and Agriculture Organization (FAO), the agriculture sector had a record harvest in 1998 (459,000 tonnes) thanks to abundant rainfall. This is not a credible statistic. It represents an approximately 480% increase from the 1997 production. Also, as reported by the VOA and AP, Eritrea's 1998 harvest was affected by a shortage of workers due to the forced conscription of eight percent of the Eritrean population into the army.

Assuming the 480 percent growth in agricultural output for 1998 is true, based on their weighting in the economy, the other sectors of the economy would have had to decline by 49% in order to average out to the overall growth rate of 4 percent. Obviously the industrial sector, which is dependent on Ethiopia, suffered a sharp decline in output. The service sector also has a large component related to port services. Therefore it is reasonable to assume a sharp decline in that sector also.

In summary, even using Eritrea's numbers, the only sector with increased output was the agricultural sector. But the reported magnitude of the increase can't be trusted as Eritrea is still appealing for food aid to feed nearly 15% of the population. The agricultural outlook for 1999 is even worse. Many farmers have been conscripted into the army, and the potential for increased production is non-existent. Also, Eritrea's main surplus producing region (Gash-Setit) is now a battle zone and in danger of being cut off from the rest of the country.

2. Eritrean Defense Spending
The Eritrean government denies that it is spending huge amounts of hard currency on the military. But the available data indicates otherwise. Even before the conflict with Ethiopia, Eritrea was spending an excessive amount on its military programs. In fact, in 1996, the Eritrean defense budget (968 million birr) exceeded that of Ethiopia's (786.8 million birr). This is remarkable considering that Eritrea is much smaller than Ethiopia. Note: the Ethiopian defense budget of 786.6 million birr equalled 8 percent of the federal current budget. This percentage would be even lower if the regional budgets were included. Meanwhile the Eritrean defense percentage exceeded 50 percent of the current budget and 36 percent of the total (capital plus current budgets) in 1996.

3. Eritrean Hard Currency Reserves:
The data below show that Eritrea's claim that its import cover dropped from seven months to four months is not credible. Eritrea never had more than 5.1 months of coverage during 1993-1997 to begin with.

The truth appears to be that the Eritrean government is unable to fund its former level of imports let alone the new military shopping spree. This explains why the black market rate for dollars has declined to 10 nakfas per dollar (Reuters April 12, 1999). This also explains the presence of high-level Eritrean officials in the West, peddling their war bonds, and the near-constant presence of the Eritrean president in Libya.

4. Importation of foreign workers:
The Eritrean foreign ministry made the following humorous (and ludicrous) statement.

"Moreover, the growth during this period was accompanied by a faster job creation in all sectors than the growth in the labor force, thus resulting in the importation of large numbers of workers from Ethiopia and some Asian countries."

The fact is that the IMF statistics show Ethiopia's average annual growth outpacing Eritrea's by 7% to 5% from 1993 to 1997. The net flow of labour was into Ethiopia not Eritrea.

The IMFs statistics also show the severe unemployment problem in Eritrea. The Ministry of Labor and Human Welfare has never been able to find jobs for even 50 percent of the registered job seekers in Eritrea.

From the above it is clear that Eritrea has a severe unemployment problem. The US embassy also noted the lack of job creation in March 1998:

"Creating jobs and developing opportunities for Eritrea's youth are serious challenges. This is especially difficult in the current environment, with no export growth, few new firms being created, and downsizing by the government and most companies."

Now as for Asian workers migrating to Eritrea in the hope of finding employment, the Eritrean foreign ministry seems to be referring to the presence of Indian teachers in Eritrea. Eritrea does not have enough qualified high school teachers. Therefore Eritrea borrowed 62 million dollars from the World Bank for various human capacity development projects. The Indian teachers are being paid with that loan and not with funds generated by the Eritrean economy.

5. Conclusion:
Eritrea's economy is near bankruptcy. Eritrea cannot sustain its economy let alone its war against Ethiopia. The Ethiopia-Eritrea war will not last much longer unless Eritrea can find a financial sponsor to fund its military adventures,

Now that these two journalists have taken a few tentative steps towards writing independent news reports, the Eritrean propaganda machine turns on them with a vengeance..