It is rare for this government to diverge from its headstrong stalwartness in pursuing its policies. Going into Somalia just over a year ago now and staying the course against great odds and international controversy as well as its continued proud rhetoric of independence from foreign manipulation (Prime Minister Meles Zenawi proudly proclaims that "Ethiopia is no banana republic" to be bullied) demonstrate its determination to do things its own way. This despite the stakes involved as a direly poor nation stands up to rich donors that throw around aid budgets exceeding the total fiscal expenditure.

Though not as dramatic in rhetoric - given that economic issues usual retain a dry formalism - Ethiopia has nonetheless been equally defiant against the big shots of international development. Though lauding the four consecutive years of double-digit economic growth, the likes of the International Monetary Fund (IMF) and others have urged caution in the current regime's choice of fairly loose monetary and fiscal policy. These organisations, which adhere to the fiscal and monetary austerity found to dominate policy advice after the Washington Consensus had firmly taken root in the 80s, have been urging Ethiopia to tinker with its strategy in order to perpetuate the success being enjoyed.

It is doubtful that these development partners were impressed with the central bank's move to increase the interest rate by a mere one per cent in July as the four per cent nominal interest rate is still miniscule compared to the raging inflation standing at 16pc at the time. Neither has the government chosen to attempt assuaging the critics of fiscal deficits and credit being stretched rather liberally by employing its rhetorical campaigns that it carries out so effectively to convince them of its good intentions. Thus far the tone could be labelled one of defiance.

But that might change to a small degree as indicated by the Prime Minister's words last week in a rather strange venue for any concerted and deliberate effort to alter course. It was during a meeting with investors from the grossly disappointing textile sector attended by the Ministers of Revenue and Trade and Industry that hints of acceptance that the current economic policy regime may be in choppy waters or at the least a small gamble on continued strong growth.

Another sign of the increasing, though still tiny, will of the EPRDF to at least address criticism in its rhetoric instead of merely brushing it off as uninformed or against the country's interests came when Meles had to answer textile investors' calls for yet more favouritism in extensions of credit and export promotion. The unprepared underperformers in the fledgling industry who appeared not to have bothered with the requisite sector analysis and policy review that a prudent participant would have conducted before attending the opportunistic event echoed other groups who stumble along clumsily in their calls for an overstretched government to do yet more to support them.

Many businessmen who get the ear of the Prime Minister, including Diasporas who pleaded for more tax breaks and duty omissions in an already attractive environment in meetings a few months back, seem to be stuck on the strategy of requesting more protectionism from an overly active government. This kind of attitude is too prevalent in the country as a whole but is especially troubling from those who are supposed to be leading the economy into a ruthless globalised economy where only cutthroat competitive free market players can survive. The chains of communism have not been completely abandoned as the state is still overly relied upon to provide solutions stemming from the previously overly centralised forms of governance that have dominated Ethiopia for hundreds of years.

But this time when the textile investors called for more of the same the reply Prime Minister showed an acknowledgement that the vast credit extensions rampant through this sector along with countless efforts are not only unpopular but that it would be dangerous to further them. Where previously he would have given the generalised encouragements that more would be done while avoiding specific promises, Meles was seen advocating a remotely hands-off stance where a paternalistic central authority could do little more to help a sector already rife with privileges. In a rare moment he seemed to be saying you, the private sector has to solve some of your problems (and there many in the textile industry) on your own.

This brand of rhetoric must be perpetuated, heightened and backed with concrete action. In a policy regime with drastically negative real interest rates investors with the creditworthiness to get credit are profiting from the loans themselves as the amount returned (around seven to nine per cent nominally) in real rates is less than the principal demanding on payment schedules.

The question then comes as to who is losing at the expense of these haves privileged to get the cheap loans. The answer lies in those with excess capital to store in banks at pitiful interest rates. These depositors who represent a much broader spectrum of the population than the tin upper crust who are attaining credit are financing this boom at their expense. They are also the ones who can only save their money after purchasing the necessities whose prices are spiralling upwards in part as a result of this monetary choice by the government.

This is bad not only because of the income distribution implications in a country that already suffers gross discrepancies between the upper echelons of rich urbanites compared to the peasant class (about 84pc of the country continues to earn incomes related to agriculture). It is also offers little incentive for cash to filter into the formal sector and come into measurable terms where it can be studied, accounted for and insightful policies may be constructed based on the economic signals it gives officials.

Rather, the current regimes shows gives even more weight to those who consider the large informal sector the more prudent choice. Unaccounted for economic activity is not good news for a government with low tax collection capacity and fiscal deficits.

For now the regime seems content to continue in its proudly chosen stance to go against the advice of the international donor community and perpetuates a monetary stance that discourages saving, erodes purchasing power especially of the urban middle and lower classes and creates a vicious cycle of contributions to the inflation that creates macroeconomic instability and curtails investment.

Of course, its fiscal policy choices where the largest-ever federal budget (43.2 bln Br) is going to massive infrastructure investments fuelling speculative growth, are difficult to change. The vested interests who benefit from the big contracts and the despicably low base that they must build upon are formidable repellents to change.

But the more (though not enough) independence to conduct monetary should be utilised. The National Bank of Ethiopia (NBE) should be taking action and raising interest rates instead of standing flat-footed as prices escalate and the Birr depreciates against a distressed dollar.

Hopefully, the Prime Minister's words last week signal a rethinking of the government's stubbornness to maintain its controversial inflationary policy choices. If so, it would be a bright sign of humbleness if the rhetoric were to be followed by the more decentralised economy promotion that he seemed to be indicating. Even if they were just words it is encouraging the Prime Minister feels compelled or at least that it is in his best interests to engage with those who disagree with his government's choices. This should be extended past the economy.

Only time will tell if the more standoffishness when more intervention was requested displayed last week in the textile meeting will come anything more than an anomaly. Hopefully, and to the delight of backers of the free market, it will.