Welcome to Tigrai Online,      Daily News that matters

A Brief Look into Ethiopian Amazing Economic Performance

By Habtamu Fekadu
Tigrai Onlne - March 16, 2014

After the demise of the ‘Derg’ regime in 1983, what followed since then an uphill struggle to change and revamp the regime’s procedures and structure that had strangled the country. But the struggle it took to change the messed – up structural working of the ‘Derg’ regime was huge.

As the transitional government (that served for four years shortly after the demise of ‘Derg’) began to dismantle those procedures, it was able to open a new transformative door with regards to the country’s fight against poverty and backwardness. And this transformative phase was completed (in success). But, it should be understood that when it’s said that the phase was completed, the difficulties faced to solve the problems and hindrance cannot be mentioned enough.

As this process went along, the country recorded a new history on November 29/1987. The whole Ethiopian nation, nationalities and peoples ratified a constitution that would rule over the country, after deliberating and agreeing upon it.

As the constitution was ratified by envisioning the Ethiopian people’s vision for peace, development and democratic order building, we can safely say that the positive results we currently see in the country with regards to peace and development is the direct fruit of the constitution.

Following this, many socio-economic policies and strategies were formulated and put to effect for the last twenty years, in order to revive the country’s economy from deep poverty and backwardness. And the success of their results can be easily seen by comparing the Ethiopia of today with the one twenty years ago – as the saying ‘seeing is believing’ entails.

In light with this, I will try to walk my dear readers through our country’s economical development of the last ten years. However, in order to probe into our country’s economical progress of the last ten years, we have to start from the decade before that as it had a major and irreplaceable role in the success of this decade.

As we can recall, before the dictatorial ‘Derg’ regime was overthrown along with its command economy system, the country’s economical growth was under zero. After the fall of the regime, it was predicted that it would take a huge struggle to revive that distraught economy. So, in order to fight the country’s gargantuan poverty, three principles were formulated.

Since the pace in which the government and people moved to win against the poverty (that had a stronghold on the country for long time) in the first ten years was not fast enough, formulating a principle (strategy) that would end poverty by bringing a rapid and sustainable economic growth that would also benefit the public step-by-step, was the only option (solution).

The works done in the first ten years, from 1984 up to 1993, with hopes of reviving the ailing and old economic and social institutions, turning the economy from moving backwards to forward and put it on the right path were not easy at all.

During these years, there were huge efforts exerted to decentralize the democratic institution (that administered the country), to bring the economy from command system to market-led economic system and to change the course of the economy; which was sprawling into a downward spiral (at the time) as a result of flawed policies, war and natural phenomenon.

As it can be recalled, the transitional government in addition to bringing peace and stability and making some administrative and structural adjustments, it has worked tirelessly to bring sustainable development by executing medium term programs. The consecutive economic adjustment programs that were taken within this era, focused on four basic principles.

The first focus was on reviving the economy that was devastated by policy-related issue, war and natural phenomenon; while the second aimed at adjusting the macro–economic instability that was caused as a result of the command economic system workings and flawed policies. In addition to this, it included creating a conducive situation for economic development by solving hindrances that caused a negative impact step-by-step.

The third had to do with executing programs that would end poverty through strengthening the labor force, public infrastructure and through improving the handling and usage of (our) natural resources. The fourth focused on taking steps to improve administrative capacities which would help in realizing the economic policies and development programs.

The economic improvement programs that were put to effect from 1984 up to 1993, the economy had a decent growth (on many levels). Within this mentioned ten year, the country’s (real GDP has increased from 10.5 billion birr to 17.4 billion birr, while the economy increased at an annual growth rate of 5.1%.

As it’s more than the number of the people of the country, it (the growth) has enabled to increase the rate of household income. This growth is an improvement compared to the 2% annual growth (of previous times), it can’t be said that it was moving and growing at the needed rate.

As a consequence of the growth seen on local products and the improvement seen on the supply of imports during this period, the inflation rate which used to be 21% at the end of the year 1983, dropped to 6% from 1984 up to 1993.

 Although these efforts have helped the economy turn from its downward spiral and record decent rate of growth, it can be safely said that they haven’t been able to garner the desired result on alleviating many citizens from poverty and realizing the productivity target during this period. Thus, since it was found out that there must be a change in economic growth policy, it called for post-adjustment economic policy to be formulated and put into effect.

The post-adjustment economic policy (put in effect from 1994 – 2005), recorded an economic growth that is both rapid and sustainable. This positive result war recorded as a result of the formulated economic policies and strategies.

The government has undertaken a gargantuan effort (campaign) to indoctrinate these post-adjustment policies and strategies on to the public. The government then started to put into effect these policies and strategies by undertaking huge seminars from 1994 and 1995.

However, as a consequence of the lack of preparation taken to execute these policies and strategies and the 1995 nation–wide natural famine (drought), the desired results were not seen. Be that as it may our country’s rapid and sustainable economic development started after this. After 1996; where the necessary preparations were taken, the people executed the government’s formulated policies and strategies and took the economic development further into better position.

For the last nine years, as a result of the government’s effort in encouraging (developmental) private investment and in drying rent-seeking opportunities; by doing developmental works that can’t be done by the private sector; by directing the limited resources onto developmental projects that would solve basic problems; by leading and coordinating all forces of development; and by strengthening the participation of the public, it has been able to bring about rapid and sustainable socio-economic development.

Poverty–reduction programs; which are strictly based on the post-adjustment formulated policies and strategies, have been put to effect starting from 1995. The first is known as “sustainable development and poverty reduction program”, and it was put to effect from 1995 up to 1997.

And after assessing the execution of these poverty reduction programs, the second poverty reduction program which is called “rapid and sustainable” and that lasted from 1998 to 2002 was put to effect. These two poverty reduction developmental programs had a huge role in the recording of the rapid and sustainable economic growth.

These developmental programs; taunted for their immense role in breaking free from poverty, were formulated in a way for them to mobilize the people from the kebele to the nation–wide and include developmental partners that operate on different corners of the world.

As these developmental programs were formulated by taking the country, regional and international realities into account, they have their own basic focus. (These programs have taken experience from each other with regards to executing them). The second poverty – reduction program was formulated based on the first, and the third program (the Grand Transformation Plan) itself was formulated based on the (first) two programs.

By executing the in-effect governmental policies and strategies from 1994 up to 2004, a very positive economic growth was recorded. During this period, the Gross Domestic product was able to increase from 10.5 billion birr in 1984 to a staggering 506.5 billion birr in 2004 (under a constant price).

With this, our country’s economy for grow at 11%. What makes this economic development unique (and incredible) is the fact that it was recorded at a time when the world is lunged into an economic crisis. Also during these last few years it performed better than Sub-Saharan non-energy based economies.

As this economic growth of the country is a source of large market, and by being encouraged by the conducive investment environment (created as a result of the government policies), many domestic and foreign investors are getting involved in various sectors.

And according to the (Ministry of) financial and economic development information if the growth continues in this projected path, very soon our country can become one of the economic forces of Africa.

For the last ten years, our country’s Gross domestic product raised to 29.3 billion from 8.2 billion (with dollar exchange rate of 1993). Ethiopia’s economic growth compared to other Sub-Saharan countries and the average world economy’s growth, is huge to an extent its causing a vast change.

The recorded economic growth performed better compared to the world’s average economic growth; which recorded less than 0% growth in the year 2002, enabling our country to have a better economic performance. Obviously, this success was garnered as a result the policies and strategies that are formulated by our country.

The economic structure adjustments and improvement programs taken before 1994, not only ignited the economy but it has enabled the economy growth to go in an upward trajectory; breaking the downward spiral it was in the process.


As it is believed that macro-economy stability is important for rapid and sustainable growth, efforts were made to harmonize fiscal and monetary policies, to reduce governments’ balance of payment, and to improve foreign the currency reserve. And positive results have been garnered.

According to reports, for the last ten years by giving huge attention to two major economic sectors (the Agriculture and Industry sectors), by improving the productivity of the farmers and pastoralists and by creating a conducive environment to enable the private sector get involved in the Agricultural and industrial development, it has helped the country increase its gross domestic product.

As the post-adjustment program gave huge aim to public infrastructure and human development, the results gained as a result were successful we can attest to this if we look at the road constructions, the improvements made on the quality of service of utilities like electricity, telecommunication and clean water, and the fact that the huge amount of financial and professional clout these projects demanded did not hinder the works (as much as it was feared) also speak high volume of the success.

As our economy garnered two–digit growth starting from 1996, our country’s economy was able to record the fastest and the most sustainable growth from Africa’s (top) three countries. And this growth has helped to alleviate the number of people that are under the poverty line, and offer them step-by-step benefit.

Although the government within this period was able to move the country’s economy within market–based economic system and to better the public’s living standard, it has formulated and started to execute a five year Grand Transformational plan to further guarantee the economic growth for the last three years.

As a result of this transformational plan, many segment of the society, both in the city and rural areas, were able to benefit from the economic growth by increasing their living income. In addition to this, the numbers of (domestic) millionaires have increased.

The effort exerted by the country to change from the agricultural-led policy to industry-led is also commendable. For the last ten years, the rapid and sustainable growth that has been recorded is still continuing with its momentum.

The assessment of the three years performance on realizing the Grand transformation plan is founded to be satisfactory. The first three years (of the plan) have hosted many developmental projects, creating job opportunity for many citizens through city-led micro and small enterprises is one of them.

The country’s developmental economic hub by guaranteeing rapid growth, it is benefitting the public in a big way. As part of the performance of only the three years of the GTP period, it has been able to generate 4.1 million jobs for citizens through micro and small enterprises. The efforts taken to increase productivity within the rural formers being successful, it has able to create model millionaire farmers. And this will inevitably facilitate the transformation from agriculture to industry.

The huge work done both on cities and rural areas is changing the public’s living standard for the better. So, according to many economic analysts, the country’s projected vision of entering the middle income countries within 15 years will be successful, if this rapid and sustainable growth continues.

This growth has played a role in facilitating citizen’s demand on basic necessities like education, health and clean water … etc. With this, Ethiopia has become the forefront out of the few countries that are taunted to realize the UN’s millennium development Goal set for the year 2015.

I will raise one instance (to attest to this fact) - the health sector. With regards to realizing one of the millennium development goals - decreasing the infant mortality rate. Ethiopia has been able to decrease the infant mortality rate, which used to be 204 in 1990, to 68 in 2012. In other words, the government has been able to reduce the death rate by 67% or by 2/3rd. According to UN umbrella organizations like UNICEF, WHO and World Bank Group reports, this successful effort of our government (taken for the last 22 years) has enabled the country to achieve this goals three years prior to the deadline.

The developmental state and the committed people of Ethiopia played the lion–share for this success; both of them working hand-in-hand and cooperatively. This success on one side is a positive news to friends of our country, while at the same time being a Sad news to enemies of the country, who repeatedly blackens the country’s image by claiming ‘there’s no growth’. Above all, I think this success will put to rest to those sides who say that the GTP is too broad. Here it’s necessary to raise the question, “what’s the secret behind this successful (commendable) result? We don’t have to go far to answer this.

First of all I believe many issues should be given credit for this great result. These are strong political commitment; very strong leadership exhibited by the leaders of the health sector; the successful arrangement of the stakeholders and the public’s developmental attitude and committed participation.

The other factor in this is the government’s principle that believes creating industrious citizens goes side-by–side with creating healthy citizens, and formulated health policies that goes with this principle. In addition to this, the government’s health program is envisioned in servicing the rural and city people and gives attention to providing basic health service to the public.

As the health service centered on self-protection, the government is helping the people by setting up a health system that’s supported by competent professionals. In every kebele, one health post with two women health extension workers are put for every 5000 people.  It has built a health station for every 25 thousand people.  

And with regards to fulfilling professional and material demands, the government by creating a public service mindset within the professionals, it had been able to expand its service in rural areas. I think these are the reasons for the government’s success with regard with fulfilling the MD goals. And the fact that Prime Minister Hailemariam Desalegn recently said that the country will record more than 10 % growth goes out to show that the five-year plan is well in its to being realized.

As it’s known, the agricultural sector is leading our country’s economy. The plan is to realize the transformation into industry-led economy by increasing the productivity of the agricultural sector. So, the government is working real hard (like it did for the last ten years) to make Ethiopia an industrial country and lead it into middle-income countries through its five year Grand Transformation Plan.

However, there are some elements of anti-developmental forces that are blackening our country’s progress; as their dreams and fantasy is to see a peace-less country and people that don’t benefit from development as a result. Nevertheless, the government and the people have continued with their effort to guarantee our country’s renaissance.