Table 4 – Current Account (percentage of GDP at current prices) 1999/2000 2004/05 2005/06 2006/07 2007/08 2008/09(e) 2009/10(Dip) Trade balance -14.1 -22.7 -24.3 -20.2 -21.3 -19.8 -18.3 Exports of goods (f.o.b) 6.1 6.9 6.8 6.1 5.8 5.3 5.6 Imports of goods (f.o.b) 20.2 29.6 31.0 26.3 27.1 25.1 23.8 Services 1.9 2.3 1.0 0.8 0.5 -0.3 -0.9 Factor Income -0.8 -2.9 -0.1 1.5 1.4 -0.1 -0.3 Current transfers 8.8 14.4 14.1 14.9 14.7 15.2 15.7 Current account balance -4.2 -8.9 -9.2 -3.0 -4.7 -5.0 -3.7 Source: National Bank of Ethiopia data: estimates (e) and projections (e) based on author’s calculations 342 As is to be expected, Ethiopia faces a turbulent external economic environment of plummeting commodity prices that, coupled with global recession, produced a series of shocks that aggravated the country’s balance of payments. Rapid import growth, fuelled in part by public spending, created pressure on reserve levels even prior to the surge in world food and fuel prices in 2007/08. The CRM learnt that the capital account surplus declined from 4 percent of GDP in 2006/07 to 3.6 percent in 2007/08, despite an increase in FDI, as noted above. The deterioration in the current account balance and decline in the capital account surplus resulted in a decline in international reserves of US$ 263.3 million in 2007/08, compared to an increase of US$ 85.2 million in 2006/07.  Recommendations 343 The APR Panel recommends that Ethiopia: • Continue to pursue its fiscal deficit reduction strategy; (Ministry of Finance; NBE) and, scales up efforts at targeting broad-based economic growth that reduces inequality and poverty. (Ministry of Finance) • Support the development of the capital market by setting up a stock exchange and a securities and exchange commission; (Ministry of Finance) • Reduce government intervention in NBE operations, especially statedirected credit and intervention in the operational management of banks; (GoE; Ministry of Finance) • Introduce measures to enhance payments and settlements systemautomation; (NBE) - 144 -