Economic history of Ethiopia
The
By the late nineteenth century, coffee had become one of Ethiopia's more important cash crops.[1] At that time, most trade flowed along two major trade routes, both of which terminated in the far southwest in the Kefa-Jimma region.[1] From there, one route went north to Mitsiwa, via Gonder and Adwa, and the other along the Awash River valley to Harer then on to Berbera or Zeila on the Red Sea.[1]
Despite its many riches, Ethiopia never became a great trading nation.[1] Most Ethiopians despised traders, preferring instead to emulate the country's warriors and priests.[1] After establishing a foothold in the country, Greek, Armenian, and Arab traders became economic intermediaries between Ethiopia and the outside world.[1] Arabs also settled in the interior and eventually dominated all commercial activity except petty trade.[1]
Efforts to modernize and develop the economy in the final years of the monarchic period had relatively little success, and after the Ethiopian Revolution of 1974, nationalization, increased spending on the military and an unstable political climate did little to improve matters. A severe drought in much of the country in 1983-85 led to a disastrous famine. Only in the 1990s did the economy begin to improve, although in 2021 disputes, including open warfare, between the Tigray Region and the national government were still causing serious disruption.
1941–1974
When their
During the late 1940s and 1950s, much of the economy remained unchanged.
By the early 1950s, Emperor
In 1954–55 the government created the National Economic Council to coordinate the state's development plans.
The first five-year plan (1957-61) sought to develop infrastructure to link isolated regions, particularly in transportation, construction, and communications.[1] Another goal was an indigenous cadre of skilled and semiskilled personnel to work in processing industries to help reduce Ethiopia's dependence on imports.[1] The plan also proposed to accelerate agricultural development by promoting commercial agricultural ventures.[1] The second five-year plan (1962-67) began a 20-year program to change Ethiopia's predominantly agricultural economy to an agro-industrial one.[1] The plan's objectives included diversification of production, introduction of modern processing methods, and expansion of the economy's productive capacity to increase the country's growth rate.[1] The third five-year plan (1968-73) sought to raise manufacturing and agro-industrial performance.[1] Unlike its predecessors, the third plan expressed the government's willingness to expand educational opportunities and to improve peasant agriculture.[1] Total investment for the first five-year plan reached 839.6 million birr, about 25 percent above the planned 674 million birr figure; total expenditure for the second five-year plan was 13 percent higher than the planned 1,694 million birr figure.[1] The allocation for the third five-year plan was 3,115 million birr.[1]
The government lacked the administrative and technical capabilities to implement a national development plan, and staffing problems plagued the Planning Commission (which prepared the first and second plans) and the Ministry of Planning (which prepared the third).[1] Many project managers failed to achieve plan objectives because they neglected to identify the resources (personnel, equipment, and funds) and to establish the organizational structures necessary to facilitate large-scale economic development.[1]
During the first five-year plan, the gross national product (GNP) increased at a 3.2 percent annual rate as opposed to the projected figure of 3.7 percent, and growth in economic sectors such as agriculture, manufacturing, and mining failed to meet the plan's targets.[1] Exports increased at a 3.5 percent annual rate during the first plan, whereas imports grew at a rate of 6.4 percent per annum, thus failing to correct the negative balance of trade that had existed since 1951.[1]
The second five-year plan and third five-year plan anticipated that the economy would grow at an annual rate of 4.3 percent and 6.0 percent, respectively.[1] Officials also expected agriculture, manufacturing, and transportation and communications to grow at respective rates of 2.5, 27.3, and 6.7 percent annually during the second five-year plan and at respective rates of 2.9, 14.9, and 10.9 percent during the third five-year Plan.[1] The Planning Commission never assessed the performance of these two plans, largely because of a shortage of qualified personnel.[1]
However, according to data from the Ethiopian government's Central Statistical Authority, during the 1960–61 to 1973–74 period the economy achieved sustained economic growth.[1] Between 1960 and 1970, for example, Ethiopia enjoyed an annual 4.4 percent average growth rate in per capita gross domestic product (GDP).[1] The manufacturing sector's growth rate more than doubled from 1.9 percent in 1960–61 to 4.4 percent in 1973–74, and the growth rate for the wholesale, retail trade, transportation, and communications sectors increased from 9.3 percent to 15.6 percent.[1]
Relative to its neighbors, Ethiopia's economic performance was mixed.[1] Ethiopia's 4.4 percent average per capita GDP growth rate was higher than Sudan's 1.3 percent rate or Somalia's 1 percent rate.[1] However, Kenya's GDP grew at an estimated 6 percent annual rate, and Uganda achieved a 5.6 percent growth rate during the same 1960–61 to 1972–73 period.[1]
By the early 1970s, Ethiopia's economy not only had started to grow but also had begun to diversify into areas such as manufacturing and services.
1974–1991
The 1974 revolution resulted in the nationalization and restructuring of the Ethiopian economy.[1] After the revolution, the country's economy went through four phases.[1]
Internal political upheaval, armed conflict, and radical institutional reform marked the 1974-78 period of the revolution.
In the second phase (1978-80), the economy began to recover as the government consolidated power and implemented institutional reforms.[1] The government's new Development Through Cooperation campaign (commonly referred to as zemecha) also contributed to the economy's improvement.[1] More important, security conditions improved as internal and external threats subsided.[1] In the aftermath of the 1977-78 Ogaden War and the decline in rebel activity in Eritrea, Addis Ababa set production targets and mobilized the resources needed to improve economic conditions.[1] Consequently, GDP grew at an average annual rate of 5.7 percent.[1] Benefiting from good weather, agricultural production increased at an average annual rate of 3.6 percent, and manufacturing increased at an average annual rate of 18.9 percent, as many manufacturers whose had shut down, particularly in Eritrea, reopened.[1] The current account deficit and the overall fiscal deficit remained below 5 percent of GDP during this period.[1]
In the third phase (1980-85), the economy experienced a setback.[1] Except for Ethiopian fiscal year (EFY) 1982–83, the growth of GDP declined.[1] Manufacturing took a downturn as well, and agriculture reached a crisis stage.[1] Four factors accounted for these developments.[1] First, the 1984-85 drought affected almost all regions of the country,[1] so the government committed scarce resources to famine relief and tabled long-term development projects.[1] Consequently, the external accounts (as shown in the current account deficit and the debt service ratio) and the overall fiscal deficit worsened, despite international drought assistance totaling more than US$450 million.[1] Close to eight million people became famine victims during the drought of the mid-1980s, and about 1 million died.[1] Second, the manufacturing sector stagnated as agricultural inputs declined.[1] Many industries exhausted their capacity to increase output;[clarification needed] as a result, they failed to meet rising demand for consumer goods.[1] Third, the lack of foreign exchange and declining investment reversed the relatively high rate of growth in manufacturing of 1978–80.[1] Finally, Ethiopia's large military establishment created a major burden on the economy.[1] Defense expenditures during this time absorbed 40 to 50 percent of the government's current expenditures.[1]
In the fourth period (1985-90), the economy continued to stagnate, even though an improvement in the weather in EFY 1985–86 and EFY 1986–87, helped reverse the agricultural decline.[1] The manufacturing sector also grew during this period, and GDP increased at an average annual rate of 5 percent.[1] However, the lingering effects of the 1984-85 drought undercut these achievements and contributed to the economy's overall stagnation.[1] During the 1985-90 period, the current account deficit and the overall fiscal deficit worsened to annual rates of 10.6 and 13.5 percent, respectively, and the debt service ratio continued to climb.[1]
1991–present
Since 1991, the Ethiopian government has embarked on a program of economic reform, including
In 2015, Ethiopia had 2,700
The Ethiopian government is stepping up its efforts to attract foreign investors, particularly in the textile sector. They can now import machines without customs duties, and benefit from a tax exemption for ten years, rents much lower than market prices, and almost free water and electricity. Major brands have established themselves in the country, such as Decathlon, H&M and Huajian. These companies also benefit from a cheap labor force, with a monthly salary of around 35 euros. Finally, trade agreements between Ethiopia and the European Union allow them to export duty-free.[5] There is huge economic reforms, starting from 2018, has been undertaken after the leadership of EPDRF-TPLF foll down and replaced by "Prosperity Party" leadership of Abiy Ahimed Ali (PHD).
See also
References
- ^ OCLC 25869403. This article incorporates text from this source, which is in the public domain.)
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: CS1 maint: postscript (link - ^ "Political and Economic History of Ethiopia". www.sjsu.edu. Retrieved 2021-10-10.
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- ^ Piot, Olivier (1 November 2017). "Rencontre avec les pionniers de l'anticapitalisme". Le Monde diplomatique.
- ^ Gérand, Christelle (1 April 2019). "Going for textiles". Le Monde diplomatique.