Related Searches
Definitions

scale back

Economy of Ethiopia

The economy of Ethiopia is based on agriculture, which accounts for half of gross domestic product (GDP), 60% of exports, and 80% of total employment.

Ethiopia has - almost uniquely in Africa - virtually no private sector business at all. There are no Patent Laws in Ethiopia. Many government owned properties during the previous regime have now been transferred to pro-government enterprises in the name of privatization. Telecommunications remain a state monopoly, stifling the development of mobile phones that have become ubiquituous elsewhere in Africa. In financial services, no foreign banks are allowed and it remains almost impossible to find start-up loans for small and medium businesses. Youth unemployment is estimated to be as high as 70%. Because of population growth, just to stand still the country must produce hundreds of thousands of jobs every year.

Furthermore, the Ethiopian constitution defines the right to own land as belonging only to "the state and the people", but citizens may only lease land (up to 99 years), and are unable to mortgage, sell, or own it. Various groups and political parties have sought for full privatization of land, while other opposition parties are against privatization and favor communal ownership.

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. Despite recent improvements, with an exploding population Ethiopia remains one of the poorest nations in the world.

Industries

Agriculture

The economy of Ethiopia is based on agriculture, which accounts for half of gross domestic product (GDP), 60% of exports, and 80% of total employment.

Ethiopia's agriculture is plagued by periodic drought, soil degradation caused by overgrazing, deforestation, high population density, high levels of taxation and poor infrastructure (making it difficult and expensive to get goods to market). Yet agriculture 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.

Agriculture accounts for almost 41 percent of the gross domestic product (GDP), 80 percent of exports, and 80 percent of the labour force. Many other economic activities depend on agriculture, including marketing, processing, and export of agricultural products. Production is overwhelmingly of a subsistence nature, and a large part of commodity exports are provided by the small agricultural cash-crop sector. Principal crops include coffee, pulses (e.g., beans), oilseeds, cereals, potatoes, sugarcane, and vegetables. Exports are almost entirely agricultural commodities, and coffee is the largest foreign exchange earner. Ethiopia is Africa's second biggest maize producer. Ethiopia's livestock population is believed to be the largest in Africa, and as of 1987 accounted for about 15 percent of the GDP.

Industry and manufacturing

This sector constitutes about 4 percent of the overall economy, although it has shown some growth and diversification in recent years. Much of it is concentrated in Addis Ababa. Food and beverages constitute some 40 percent of the sector, but textiles and leather are also important, the latter especially for the export market. A program to privatize state-owned enterprises has been underway since the late 1990s.

Services

Aside from wholesale and retail trade, transportation, and communications, the services sector consists almost entirely of tourism. Developed in the 1960s, tourism declined greatly during the later 1970s and the 1980s under the military government. Recovery began in the 1990s, but growth has been constrained by the lack of suitable hotels and other infrastructure, despite a boom in construction of small and medium-sized hotels and restaurants, and by the impact of drought, the recent war with Eritrea, and the specter of terrorism. In 2002 more than 156,000 tourists entered the country, many of them Ethiopians visiting from abroad, spending more than US$77 million.

Mining and minerals

The mining sector is quite small in Ethiopia. The country has deposits of coal, gemstones, kaolin, iron ore, soda ash, and tantalum, but only gold is mined in significant quantities. In 2001 gold production amounted to some 3.4 tons.

Energy

Aside from waterpower and forests, Ethiopia is not well endowed with energy sources. The country derives about 90 percent of its electricity needs from hydropower, which means that electricity generation, as with agriculture, is dependent on abundant rainfall. Present installed capacity is rated at about 650 megawatts, with planned expansion to 1,330 megawatts. Less than one-half of Ethiopia’s towns and cities are connected to the national grid. Plans are afoot to exploit natural gas reserves in the southeastern lowlands, estimated at . Petroleum requirements are met via imports of refined products, although some oil is being hauled overland from Sudan. Exploration for gas and oil is underway in the Gambela Region bordering Sudan. In general, Ethiopians rely on forests for nearly all of their energy and construction needs; the result has been deforestation of much of the highlands during the last three decades.

Transport

Prior to the outbreak of the 1998–2000 Ethiopian–Eritrean war, landlocked Ethiopia mainly relied on the seaports of Asseb and Massawa in Eritrea for international trade. , Ethiopia uses the ports of Djibouti, connected to Addis Ababa by the Addis Ababa - Djibouti Railway, 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.

Macro-economic trend

The following table displays the trend of Ethiopia's gross domestic product at market prices, according to estimates by the International Monetary Fund with figures in millions of Ethiopian Birr.

Year Gross Domestic Product US Dollar Exchange
1980 14,665 2.06 Birr
1985 19,476 2.06 Birr
1990 25,011 2.06 Birr
1995 47,560 5.88 Birr
2000 63,924 8.15 Birr
2005 96,676 8.65 Birr

The current GDP per capita of Ethiopia shrank by 43% in the 1990s.

External trade

The major agricultural export crop is coffee, providing about 65% of Ethiopia's foreign exchange earnings. Coffee is critical to the Ethiopian economy. More than 15 million people (25% of the population) derive their livelihood from the coffee sector. According to current estimates, coffee contributes 10% of Ethiopia's GDP.

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

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 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.

See also

References

External links

Search another word or see scale backon Dictionary | Thesaurus |Spanish
Copyright © 2014 Dictionary.com, LLC. All rights reserved.
  • Please Login or Sign Up to use the Recent Searches feature
FAVORITES
RECENT

;