Economy & Industry

Poor incomes in a growing economy

Ethiopia has one of fastest-rising non-oil economies in Africa. Over the last decade, the economy has prospered, with growth over ten per cent in the last two years.

Clearing of debts

In 2001, Ethiopia qualified for debt relief under the Highly Indebted Poor Countries scheme. And in 2005, it benefited from 100 percent debt relief on loans from the IMF, the World Bank and African Development Bank.

However, Ethiopia still remains among the 20 poorest countries of the world. Economic growth struggles to keep pace with a rising population and the country spends more on importing goods than it earns from exports. Inflation causes rising costs of living.

According to the World Health Organization (WHO), nearly 40% of the population lives below the international poverty line, surviving on less than a dollar each day.

  • Addis Ababa roads
  • Roadside stalls in Addis Ababa

An agricultural economy

The long-term plan

Part of the country’s new five-year economic plan includes opening up large-scale commercial farming (as well as investment in infrastructure, industrialisation and small private enterprises). However, land-rights remain an issue; the state owns all land. Unless people have long-term tenant leases, they can be moved.

Ethiopia’s economy relies heavily on agriculture, which accounts for nearly half the country’s earnings. But the sector needs much investment. Despite Ethiopia’s many rivers and lakes, only 4 percent of land is irrigated and farming methods are basic. The country also suffers from regular droughts which affect the yields of small-scale farmers.

Coffee is the main export, earning the country over 550 million dollars each year. Ethiopia is one of the world’s top ten producers of green coffee beans.

When trading prices for Ethiopia’s coffee dipped in 2006, some farmers turned to cultivating qat/khat/chat in order to earn extra income. This plant acts as a mild drug and has been grown for centuries in Ethiopia. The leaves are chewed by many locals to produce a state of relaxation.

Creating electricity

Ethiopia has overtaken Egypt as Africa’s second most-populous nation. Much of the population still relies on wood/charcoal for its energy needs and this has led to serious deforestation across the country.

Patriotic bonds

Some backing for the Grand Renaissance Dam will come from investment banks in China. Ethiopians are also being encouraged to subscribe to a national bond issue to help fund the scheme.

The government would like to increase access to electricity. Already, Ethiopia produces significant amounts of hydro-electric power from stations along the country’s rivers (such as the Awash, Blue Nile, Omo, and Shebele Rivers). However, much of this power is exported to other countries. Significant investment is needed in the national infrastructure to expand electricity domestically.

Three new dam schemes have been proposed as part of a plan to produce 20,000 MegaWatts of electricity within the next decade. The proposed dams would be constructed along the Blue Nile. Since Egypt relies on the Nile waters, Ethiopia has agreed to allow a technical team to look into the impact of the first dam to be constructed – the Grand Renaissance Dam.