The latest appearance of Prime Minister Meles Zenawi during his now more or less regular question time at Parliament was perhaps his shortest. It could also be said to have been the least interesting, for many of the questions directed from MPs were too weak to get the best out of him.

Had last Thursday (March 19, 2009) been a case where the Prime Minister presented his annual or half-year report on the state of national affairs, there could have been a more interesting, rigorous, and informative debate, but all based on the would be report. Last Thursday was not only unexciting, but also spectacularly less informative in terms of substance, whether it was on the state of the economy or politics.

Some of the questions were simply a waste of time to the Prime Minister; he had to repeat himself several times after an MP from CUD asked him if at all Ethiopia’s objectives to intervene in Somalia have been met, and wanted him to disclose causalities in terms of loss of soldiers, or cost to the national economy. As recently as a few weeks ago, Meles had addressed these very questions during a press conference; should the MP not have been satisfied with his answers, the least he could have done was rephrase and reframe his questions.

Another MP from the EDP was, perhaps, so misinformed that he based his question about a multilateral agreement between the European Union (EU) and African, Caribbean and Pacific (ACP) countries on a wrong premise. There was no deal signed, as he alleged, between the two parties on the Economic Partnership Agreement (EPA) that had been meant to be concluded in December 2007, after eight years of negotiations. If there was any deal signed, it was an interim agreement in order to somehow continue the talk, while complying with the World Trade Organization (WTO) deadline imposed by the EU and the other member countries, to which Ethiopia is not a part.

Nonetheless, there appears to be some change in form at Parliament, where the MPs from the Ethiopian Democratic Party (EDP), a parliamentary opposition that identifies its ideological linage to the liberal democrats, were observed full of zip. They were good at taking advantage of the parliamentary platform to raise several questions and bring forth the sights and sounds of several of their leaders to the public. It seems a conscious, deliberate and politically calculated move on the part of the liberal democrats to use the opportunity, perhaps knowing that the questions time would be broadcast live.

For a change, last week’s parliamentary scene was less of a battleground for partisan political showdown, as it often is. Many of the questions raised were focused on social issues, although there were other issues included in the 10 questions raised.

The economic front was one area where the MPs were not strong on the issue, on which the Prime Minister should have been grilled. Indeed, the liberal democrats have raised economic issues, though again there was one based on the wrong premise. An MP from EDP claimed that the ratio of non-performing loans (NPLs) sustained by commercial banks is high, and their attempt to recover them is not going well. He could not have been anymore wrong; for the first time in many years, the ratio of NPLs to total loans is on the decline and reached below 10pc, an amount within the norms of international banking practice.

All said though, and despite a claim by the state owned Commercial Bank of Ethiopia (CBE) that its NPLs are four per cent of the total loan portfolio, and drastically lower than the over 50pc it was five years ago, the government should worry because one of the reasons why NPLs declined with the CBE is due to the increase in the total loans and advances than the recovery of sick loans. When the time comes for current loans to mature, there could be a situation where the ratio of NPLs to total loans and advances would surge all at once.

Where there was insufficient debate was rather on macro economic challenges the country has been confronted with, and the policy direction the administration of the Revolutionary Democrats ought to take.

Ironically, this is a kind of challenge that compelled the administration to take a course of action that is contrary to the current global trend. Elsewhere in the world, particularly in the developed countries, governments are pumping billions of dollars in order to rescue their economies from complete collapse. There are several countries in the expansionary mood both on the fiscal and monetary front, the largest being the United States government that is projected to spend nearly one trillion dollars in salvaging the economy from a financial meltdown. So are other European countries, such as Germany, France, Great Britain, and Japan on the same path.

Ethiopia’s is a story of contraction, largely on the monetary front. This was caused first due to record high inflation, and followed by both domestic credit and foreign exchange crunch. Although few MPs had wanted the Prime Minister to address issues in relation to the painfully severe problems in availing foreign exchange to let importers open letters of credit, they were hardly forceful in their voice challenging him on why his administration has been reluctant to deal with the real issue.

Inflation had begun galloping in the economy perhaps four years ago. It largely came as a result of policies followed by Revolutionary Democrats in fiscal expansion. They embarked on mega public works, putting up all kinds of public infrastructure. The utility monopoly alone is allowed to undertake hydro electric dam projects that are projected to consume close to four billion dollars when completed in 2011.

Add to these expansions in telecom, condominium, irrigation dams, roads and the administration’s attempt to provide welfare to the urban poor importing subsidised wheat. This is not to mention the hundreds of million of dollars in cash development partners have been spending paying millions of farmers in four regional states to cover the bill for the social safety net programme.

This has resulted in the economy being flooded with money. Broad money supply was growing by an annual 23pc, reaching record high of 65.7 billion Br last Ethiopian fiscal year. The administration was too late to admit that the escalation of prices, particularly over the past two years was partly a monetary phenomenon; thus, it was too late to respond by employing monetary policy instruments under its disposal.

The fiscal expansion has also led to a widening of the gap in trade deficit from the five-year average (beginning 1997) of negative 12pc of the GDP to negative 20.3pc last year, according to the IMF. This was largely attributed to dramatic increases of prices on import goods, more particularly what was spent to finance the procurement of oil that had once threatened to consume the entire revenues from the nation’s exports.

This shock on the economy due to increases in global goods Ethiopia is desperate to buy is the reasons behind the depilated amount of foreign currency reserve - the Prime Minister admitted last week that it had reached 850 million dollars at some point - an alarming position of the nation’s balance of payments.

Although the once wildly high oil price and that of other commodities have substantially declined over the past six months, Ethiopia’s import bill remains as high as nine billion dollars. No volume of revenues from exports - ironically during a period of global recession - or proceedings from foreign direct investment, or official grants from development partners, appear to be sufficient to balance this.

The debate on what course of action the administration should take is what was less talked about in Parliament last week. Nonetheless, there is hardly any agreement over this among the various actors involved in the policymaking, and those who have an advisory role.

If at all there is any agreement around here, it is what the government and the IMF have agreed to cut budget deficit to 1.5pc of the GDP, and bring broad money supply to below 20pc of the GDP, all in an effort to contain inflation within a single digit. Boosting the foreign currency reserve to an amount that could cover three months of imports of the country is where the two parties have reached an agreement.

Little wonder then there ought to be that the administration is employing all the instruments it has on the monetary policy front since June 2007. It increased the reserve ratio of banks from five per cent to 15pc; it had adjusted the interest rate on saving by a marginal one percentage point to four percent and on lending to eight per cent; it introduced capping on what the CBE could lend, reducing it down to 14 billion Br; and of late, cunningly advised private banks to be conservative on how much money they put in private hands.

This may have brought contraction into the economy to a certain degree, and sucked some of the 73.5 billion Br pumped into the economy in aggregate lending. Ironically, it does not seem to have caused much of a dent to either the domestic inflationary pressure or the demand for foreign currency to pay for imports.

The thorny debate remains whether or not the administration should take measures in the area of fiscal contraction and cut back public investment on consumption, and more significantly on investment. Convinced - perhaps rightly so - that the inflation is due to high demand, the Revolutionary Democrats have concluded that the answer is to boost supply as opposed to compromising public expenditure on investments simply to offset short term and transitory challenges.

Some would argue that prescribing a retrenchment of the macro economy is “cruel medicine” for a country such as Ethiopia. They would rather see the administration pursue fiscal expansion considering the short term contraction would have a devastating impact on the long term national development agenda.

Others recommend the government put a break - even temporarily - on its public expenditure; further devaluation of the Birr to boost its foreign exchange reserve; and a push on its reform agenda to open up areas, such as the finance and telecom sectors, as well as the complete value chain in the tourism sector so that it attracts foreign direct investment.

Doing this may also bring another reward that could offer short term relief. Development partners, such as the World Bank seem to be trading off additional reform measures with the provision of loans and grants, that is glucose to the patient that is structurally malnourished of foreign currency.

Whether or not policy measures that result in short term relief at the expense of long term growth, or sustaining short lived pain in order to ensure lasting national wellbeing is justified remains at the core of the debate. That should have been where MPs spent most of their energy.