Ethiopian Economy - Ethiopia Insight

The economy of Ethiopia is based on agriculture, which accounts for half of gross domestic product (GDP), 90% of exports, and 80% of total employment.

The major agricultural export crop is coffee, providing 65%-75% of Ethiopia's foreign exchange earnings. Coffee is critical to the Ethiopian economy, and Ethiopia earned $267 million in 1999 by exporting 105,000 metric tons. According to current estimates, coffee contributes 10% of Ethiopia's GDP. More than 15 million people (25% of the population) derive their livelihood from the coffee sector.

Other exports include live animals, hides, gold, pulses, oilseeds, and khat (or qat), a leafy shrub which has psychotropic qualities when chewed.

Ethiopia's agriculture is plagued by periodic drought, soil degradation caused by overgrazing, deforestation, high population density, and poor infrastructure, making it difficult and expensive to get goods to market. Yet it is the country's most promising resource. A potential exists for self-sufficiency in grains and for export development in livestock, grains, vegetables, and fruits. As many as 4.6 million people need food assistance annually.

Gold, marble, limestone, and small amounts of tantalum are mined in Ethiopia. Other resources with potential for commercial development include large potash deposits, natural gas, iron ore, and possibly petroleum and geothermal energy. Although Ethiopia has good hydroelectric resources, which power most of its manufacturing sector, it is totally dependent on imports for its oil. Prior to the outbreak of the 1998–2000 Ethiopian–Eritrean war, landlocked Ethiopia mainly relied on the seaports of Assab and Massawa in Eritrea for international trade. Ethiopia currently uses the ports of Djibouti, connected to Addis Ababa by rail, and to a lesser extent, Port Sudan in Sudan. In May 2005, the Ethiopian government began negotiations to use the port of Berbera in Somaliland. Of the 23,812 kilometres of Ethiopia's all-weather roads, 15% are asphalt. Mountainous terrain and the lack of good roads and sufficient vehicles make land transportation difficult. However, the government-owned airline is excellent. Ethiopian Airlines serves 38 domestic airfields and has 42 international destinations.

Dependent on a few vulnerable crops for its foreign exchange earnings and reliant on imported oil, Ethiopia lacks sufficient foreign exchange. The financially conservative government has taken measures to solve this problem, including stringent import controls and sharply reduced subsidies on retail gasoline prices. Nevertheless, the largely subsistence economy is incapable of supporting high military expenditures, drought relief, an ambitious development plan, and indispensable imports such as oil and, therefore, must depend on foreign assistance.

In December 1999, Ethiopia signed a $1.4 billion (1.4 G$) joint venture deal to develop a huge natural gas field in the Somali Region. The war with Eritrea has forced the government to spend scarce resources on the military and forced the government to scale back ambitious development plans. Foreign investment has declined significantly. Government taxes imposed in late 1999 to raise money for the war will depress an already weak economy. The war has forced the government to improve roads and other parts of the previously neglected infrastructure, but only certain regions of the nation have benefited.

The current government has embarked on a program of economic reform, including privatization of state enterprises and rationalization of government regulation. While the process is still ongoing, the reforms have begun to attract much-needed foreign investment.

Economy of Ethiopia

Ethiopian Ministry of Information says nation can fully ensure food security within short period

Video Ethiopian farmer hopes for bumper crop

15 February, 2008

Addis Ababa, February 15, 2008 (Addis Ababa) - The Ministry of Information said that as long as Ethiopia is able to produce food crops in sufficient quantity, variety and quality sustainably, it can fully ensure food security within a short period of time. more >>

Ethiopia’s Economy a Success: UK Minister

27 November, 2007

Britain’s newly appointed Minister for International Development, Shriti Vadera, has described Ethiopia’s economy as “very successful”, but shunned reporters’ questions on whether she thinks it is based on free market principles. more >>

Starbucks and Ethiopian Intellectual Property Office (EIPO) Partner to Promote Ethiopia’s Coffee and Benefit the Country’s Coffee Farmers

21 June, 2007

(CSRwire) ADDIS ABABA and SEATTLE – Representatives of the Government of the Federal Democratic Republic of Ethiopia and senior leaders from Starbucks Coffee Company today announced that they have concluded an agreement regarding distribution, marketing and licensing that recognizes the importance and integrity of Ethiopia’s specialty coffee designations. more >>

Ethiopia's Economy Predicted To Show 10.1 Per Cent Growth This Year: Meles

12 March 2007

Addis Ababa , March 12, 2007 (Addis Ababa) - Prime Minister Meles Zenawi said the Ethiopian economy would likely to show a 10.1 per cent growth this year continuing the successive economic growth over the last four years. more >>

Meles says Ethiopia hopes to register substantial economic growth next year

April 28 ,2006

Prime Minister Meles said Ethiopia hopes to register next year an economic growth no less than that of the past three years.

In a press conference he gave to local and international journalists here on Thursday, Prime Minister Meles said necessary plans have almost been put in place to register substantial economic growth in the next Ethiopian year.

The government has designed a package of five-year development plans that would enable to sustain the economic growth the country registered over the past three years, he said.
Agriculture would continue to be the leading force of the nations economic growth in the next year, Meles said, adding as part of the efforts to boost productivity, necessary agricultural inputs such as fertilizer and select seed have already been imported.

The Prime Minister also said the government would step up urban housing projects, expansion of micro- and small-scale businesses as well as other interventions aimed at reducing unemployment. Special attention would also be given to the development of floriculture and horticulture, textiles and leather and leather products manufacturing as well as the production of cement and sugar, Meles said. With regard to expansion of infrastructure, Meles said expansion activities in hydro-electric power generation, telecommunications and road sector development would be strengthened.

Prime Minister Meles said it has been confirmed that the country's economy has registered a significant growth over the past three years, and that he hoped the nation would be able to attain the MDGs. Yet, he said, the recent rise in the price of commodities is caused by internal and partly external factors. Externally, the rise in the price of fuel in the world market has contributed to price rise.

The increase in the price of construction materials and sugar has also subsequently brought about a rise in the price of commodities, he added. Responding to a question concerning the Addis Ababa City Administration, Meles said the best option is handing over power to those elected peoples' deputies so that the city could be administered them.

However, he said, as the City remained without any permanent administration since October last year, the House of Peoples Representatives had decided that if the elected deputies fail to take over, the city would be led by an interim administration of professionals for a year, to be followed by a fresh election of peoples representatives to run the administration.
Hence, Meles said, if sufficient number of peoples' deputies come forward to take over the administration, the formal transfer of power would be carried out.

Otherwise, Meles said, the decision of the House would be implemented, and added that the National Electoral Board of Ethiopia would present its report on the matter soon.
Concerning jailed members of opposition parties, Meles said, there is no negotiation going on behind the curtain, adding the matter is all in the hands of the court of law, and the government will by no means interfere in the works of the judiciary.

Ethiopia's largest hydroelectric power project goes smoothly

April 12, 2006

The state-owned Ethiopian Electric Power Corporation (EEPCo) said Tuesday more than 35 percent of the work on the Gilgel Gibe-II Hydroelectric Power Generation Project, being carried out with 5.2 billion birr (about 600 million U.S. dollars), has been finalized.

Project Coordinator Simegnew Bekele said the project would boost the electric power supply of the country by 52 percent.

Simegnew made the remarks while briefing lawmakers of the lower House of People's Representatives, who paid a visit to the project recently.

The Gilgel Gibe II hydroelectric power generation station would generate 420mw electric power by diverting the Gilgel Gibe River, Simegnew said.

The construction of an 80-km road which is part of the project is being carried out, according to the coordinator.

The Italian government and the European Investment Bank provided, respectively, close to 2.3 billion birr (265 million dollars) and 517.7 million birr (59.64 million dollars) loan for the execution of the project, while the Ethiopian government covers the balance, he said.

The coordinator said work on the project is being undertaken round-the-clock with some 4,000 workers, including foreigners working on the site.

He said the first turbine of the power house is expected to become operational in December 2007.

It is to be recalled that the Gilgel Gibe I hydroelectric power generation project was finalized two years ago and is currently generating 184mw electric power.

Source: Xinhua

Ethio-Israel economic cooperation bearing fruits: official

April 09, 2006

The ongoing cooperation between Ethiopia and Israel in areas of trade, investment and tourism promotion is showing "encouraging improvement," officials said Saturday.

Fasil Meles, an official from Ethiopia's Foreign Ministry, told journalists that the volume as well as the diversity of goods Ethiopia exports to Israel has been increasing following the cooperation agreements signed between the two countries.

Fasil said agricultural products, such as sesame, coffee, cereals, spices and leather products, among others, are the major items Israel imports from Ethiopia.

Sesame takes the lion's share of Ethiopia's export to Israel, Fasil said, adding that revenue, generated from the particular produce, amounts to an average of 22 million U.S. dollars annually.

The trade balance between the two countries is in favor of Ethiopia, Fasil said. That is because of the presence of Ethiopian Jews in Israel who consume Ethiopian products.

He said Ethiopia is undertaking aggressive investment promotion works through various ways.

Fasil said some 45 Israeli investors have traveled to Ethiopia to launch investment activities, owing much to the country's promotion activities.

He said an average of 3,000 Israeli tourists travel to Ethiopia annually.

Fasil said there is still a lot to be done to expand tourism in Ethiopia, adding that Ethiopia is working out on a tourism strategy that caters for the needs of Israeli tourists.

Source: Xinhua

Ethiopia among 17 chosen countries for World Bank debt relief

03/30/2006

The 40-year term of debt cancellation will begin on July 1. It will cover debt service payments of the 17 countries to the World Bank on debt accumulated to the end of December 2003.

World Bank member nations on Tuesday approved a long-awaited $37 billion debt relief package for 17 impoverished countries that included ways to compensate the development lender for the write-off.

The approval brings to an end months of tough negotiations among the World Bank's biggest donors over how to fund future loans by the bank's low-interest lending arm, the International Development Association.

The 40-year term of debt cancellation will begin on July 1. It will cover debt service payments of the 17 countries to the World Bank on debt accumulated to the end of December 2003, allowing governments to increase spending on programs that reduce poverty. "This is a historic agreement combining increased financing with debt relief, which will help poor countries meet the Millennium Development Goals," World Bank President Paul Wolfowitz said.

The package covers countries that graduated from the Heavily Indebted Poor Countries Initiative, or HIPC, a global debt relief plan approved in 1996 that was based on good economic performance.

Mauritania would not be covered under Tuesday's decision until its government strengthens its public expenditure management, a World Bank official said. However, the country could still qualify by July. The bank had received firm commitments from donor countries to cover 60 percent of the costs for the full 40-year term, while the rest "will have to be dealt with over time," the official said.

Some donors had worried that the debt cancellation would compromise the capacity of the IDA facility to keep lending to the bank's poorest borrower countries. "It is very difficult for governments to make commitments over 40 years," the official said. "It's a good start and time will of course tell what will happen."

Among the countries to benefit are Benin, Bolivia, Burkina Faso, Senegal, Guyana, Tanzania, Mozambique, Nicaragua, Niger, Mali, Rwanda, Ethiopia, Honduras, Ghana, Uganda, Zambia and Madagascar.

More countries could become eligible for debt relief under the HIPC scheme once the World Bank and International Monetary Fund decide who qualifies. The World Bank board is expected to discuss the issue on April 6.

eitb24

End to poverty in sight for Ethiopia

16.03.06 1.00pm
By Tsegaye Tadesse

ADDIS ABABA - Ethiopia, one of the world's most needy countries, said today it could end extreme poverty if it kept up the healthy seven per cent economic growth of the last three years.

Finance Minister Sufian Ahmed told journalists that sub-Saharan Africa's second most populous nation could jump to the ranks of middle-income nations if current growth was sustained through coming decades.

The drought-prone Horn of Africa country suffers periodic famines, leaving millions dependent on food aid to survive.

"For the first time, Ethiopia's economy has shown an average of seven per cent growth over the last three years," Sufian said.

"If the trend continues for the next 20 years, Ethiopia would come out of poverty and be among middle-income nations."

Poverty in Ethiopia took global centre-stage on July 13, 1985, when Irish rock singer Bob Geldof organised charity concerts around the world, raising US$245 million ($387.7 million) in emergency aid for one of its worst ever famines.

But problems have persisted. And Ethiopia is among the countries most affected by this year's drought across east Africa.

Sufian said broad-based economic growth led by a boom in Ethiopia's key agricultural exports would raise living standards. Eighty five per cent of Ethiopia's 72 million people live off agriculture.

"The agriculture sector registered a 17.3 per cent growth in 2004, while surveys indicate that the sector will register 12.2 per cent and 10.5 per cent growth in 2005 and 2006, respectively," he said.

Thanks to a boom in coffee prices, Africa's leading coffee producer generated US$340 million from 140,000 tonnes of exports in the 2004/05 season, Sufian said.

The country earned over US$112 million from exporting oil seeds during the six months from July last year to January 2006, while 193,000 tonnes of sugar exported to Europe last year grossed US$108.7 million.

Sufian added that flower farms had become a flourishing business in Ethiopia in the past five years, with the industry's export earnings set to grow to US$100 million this year.

He said Ethiopia has benefited from debt cancellation amounting to US$9.2 billion over the past 15 years.

But he added that it also needs foreign aid and loans to build roads and hydro-power plants, which take up 10 to 20 per cent of the government budget.

- REUTERS