THE EFFECT OF PRIVATIZATION OF PUBLIC ENTERPRISE ON ECONOMIC GROWTH, IN ETHIOPIA

Abstract

This study aims to see whether privatization has long run or short run significant impact on economic growth of Ethiopia by considering GDP per capita as a proxy for economic growth and claims on private sector % of GDP as to measure of the magnitude of privatization. In order to analyze the secondary data from 1994 up to 2019 Vector error correlation model (VECM) is used. The result of the study shows debt, privatization and foreign direct investment found to have positive and statistically significant impact on long run economic growth in Ethiopia. On the other hand, both privatization and debt has statistically insignificant impact while foreign direct investment has positive and statistically significant impact on short run economic growth. Based on finding of the study, the study recommended economic growth can be improved significantly when the privatization policy accompanied with other structural changes was implemented. The government of Ethiopia should strive to strengthen privatization policies together with other policies. Still, privatization alone will not be the enchanted solution to the elusive quest for growth.