Abstract:
The aim of this research is to assess the impact of privatization on the Ethiopian economy by
using real GDP growth as a proxy for economic development and measuring the extent of
privatization through privatization proceeds. Time series data spanning from 1994/95 to 2021/22,
comprising various explanatory and response variables, was employed. The data primarily
originated from the annual reports of the National Bank of Ethiopia, Ministry of Public
Enterprises, Ethiopian Investment Commission, and relevant global databases. To establish the
long-term and short-term relationship between real GDP growth and independent variables, the
Autoregressive Distributive Lag (ARDL) method was applied. The Bounds test findings indicate
a stable long-term relationship between variables resulting from privatization. Empirical results
demonstrate that both privatization and foreign direct investment resulting from privatization
positively impact economic growth, proving statistically significant at 1% and 5%, respectively,
both in the long and short run. Conversely, inflation and government consumption, acting asvi
proxies for corruption, exhibit a negative influence on economic growth in the long term.
Unexpectedly, private domestic investment yields a negative and insignificant result in the long
run. The implications of this study for policy are noteworthy. The results suggest that
implementing privatization policies, accompanied by other structural changes, can significantly
enhance the economy. Therefore, policymakers and the government should focus on reinforcing
privatization policies alongside other strategic measures. Additionally, a close monitoring system
and consistent oversight of government consumption and budgetary practices are crucial to
prevent misallocation and mismanagement of resources
