Ethiopia - Economy

Ethiopia's economy has undergone major reforms since May 1991, when a market-oriented government came to power. Droughts, civil war, and cross-border conflicts have devastated the economy as much as socialist-style totalitarianism. The government continues to institute economic reforms designed to liberalize the economy and increase the role of private capital. Land, however, as of 2002 remained firmly in the hands of the government. A large trade deficit hampers economic development.

Agriculture, hunting, forestry, and fishing engaged 85% of the Ethiopian population and in 2002 accounted for over half of GDP and almost all exports. The agricultural sector is diverse, producing maize, sorghum, millet, other cereals (barley, wheat, and teff), tubers, and sugarcane. Coffee generated $175 million in exports in 2001 (down from $262 million in 2000), which was 60% of export earnings. Livestock production is also important, responsible for around 20% of export earnings.

The manufacturing sector, centered around Addis Ababa, produces construction materials, metal and chemical products, and basic consumer goods including food, beverages, leather, clothing and textiles. Over 90% of large-scale industry is state owned.

Ethiopia produces gold and has additional undeveloped deposits of platinum, marble, tantalite, copper, potash, salt, soda ash, zinc, nickel, and iron. Natural gas is found in the Ogaden.

To break the cycle of famine, the government has promoted extension services and fertilizers in the hope that farmers could realize their potential and poverty would be reduced. After the border war with Eritrea ended in 2000, however, bumper crops were offset by farmers' inability to find markets for their goods. The progress in the country's economic fortunes that began in the 1990s was largely quashed by the 1998–2000 war and a sharp decline in international coffee prices. Nonetheless, new building projects were due to begin in the early 2000s; dams, a new airport building, and a $15 million sugar-processing factory numbered among them. Reforms are needed in the financial sector, telecommunications, land ownership, and a cumbersome bureaucracy. The World Bank granted Ethiopia $450 million for post-war reconstruction, and the EU was an equally large contributor of development aid in 2003.

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