Addis Ababa December 31/2020 (ENA) The capital market to be introduced to Ethiopia will pave the way for the private sector to contribute to the economic development of the country, Addis Ababa University Professor of Public Policy said.
Though the capital market that introduced stock exchange is a new trend in the Ethiopian economy it has been exercised around the world as the world is moving towards the market oriented economy, he added.
Professor Costantinos, Berhutesfa told ENA that the introduction of capital market creates opportunity for investors and companies to engage in a new way of investment to raise funds by selling their shares and encourage private investment.
He said capital market will play critical role in paving the way for emerging investors and companies to benefit from distribution of wealth.
“In the first place, capital market provides trite ingredient for investors and business people to be able to function and also provide the financial resources to promote the market,” the professor stated.
According to him, it will also be an option both for the government and the private sector to collaborate on financing national development that could help the society.
In this economic alternative, job creation by the private sector would increase, and economic growth as well as social needs would be satisfied.
The economist elaborated that the capital market will help the national economy by attracting the international private sector.
Costantinos said the capital economy is the best practice to develop an economy engaged by the private sector, but needs special attention from the government to control it.
“It (the government) should establish a regulatory body for this and the next step would be financial liberalization to help the capital market to grow and develop it. And to also provide incentives for the private sector internationally and nationally to come and invest by buying shares,” he said.
A study published in 2015 argued that a capital market is vital to mobilize huge capital, improve financial access to private sector, and improve liquidity and risk sharing in an economy.
The study also stated that it improves market mechanisms in order to raise and allocate scarce financial resources, mobilize local capital, attract foreign direct investment and allocate resources to projects likely to be beneficial to the economy.
The Council of Ministers approved a new bill on capital market that introduces stock exchange last week.