The Secret Behind of Ethiopia's Socio-Economic
(Adem Mohamed 04-07-16)
decade has brought massive changes in the economy of Ethiopia. The government
has made momentous progress in developing the country. The GDP has grown
rapidly over the last decade averaging 10.8% in real terms.
were made by the government’s undertakings in roads, railroads, agricultural
infrastructure such as sugar factories, and other ventures as well as in reducing
child mortality, nearly reaching universal primary education, and fighting HIV,
malaria and tuberculosis.
size of the economy of Ethiopia has reached an estimated nominal GDP of around
$50 billion in 2014. It should be noted that the size of the GDP is bigger than
that since the estimate does not probably fully include certain areas of the
country are hard to reach due to a lack of infrastructure and insufficient
resources and certain sectors remain largely informal eve if the engage tens
also turn out to be a favorite destination of international investment. Investors
are coming en masse to contribute and share in the thriving Ethiopian economy.
progress in terms of international investment is also visible. Last year,
Ethiopia has become Africa’s eighth-largest destination of foreign direct
investment last year. Compare that to a few years ago, Ethiopia was on the 14th
position. Since then, the number of projects in Ethiopia doubled.
decade long double-digit growth and all-encompassing advance is an outcome of a
committed leadership and prudent policy directions.
The first strong feature of Ethiopia's developmental
leadership is its prudent fiscal management. Indeed, fiscal strength is
indicates the overall wellbeing of public finances, including the valuation of
relative debt burdens and debt affordability as well as the structure of
government debt. Ethiopia’s fiscal position is characterized by low and stable
deficits. These were achieved through prudent expenditure control despite the
challenges of grant financing, and improved efforts to marshal domestic
revenues as nominal spending has grown.
The federal government's budget implementation has
been skintight over the past decade, that is, closely monitoring spending so as
to ensure that it keeps up with the rate of revenues. The government's fiscal
policy buttressed the development goals of the GTP via heavy investment in crucial
sections of the economy.
Approximately 60% of government expenditures have been
directed towards public investment projects; about two-thirds of the budget steadily
targeted the pro-poor areas of education, health, agriculture, water supply and
sanitation and roads. The outcome has been remarkable. Poverty has impressively
decreased since 2000 and Ethiopia was one of only four Sub-Sahara Africa countries
with such progress.
The second feature of Ethiopia's developmental
leadership is the growing successes in revenue collection. Tax revenues have steadily
grown - that is, from 11.9% of GDP in 2005 to 12.7% of GDP in 2014 - on the
back of robust growth and enhanced tax administration. Nevertheless, there are
much more enhancements needed, as the revenue part is about just 14% of GDP which
is below the regional average of 23%.
The third important feature of Ethiopia is its resilient
and reliable development partnerships. Development partners have shown dedication
in their engagement with Ethiopia in the last decade. For example, in 2011,
donor assistances have reached $900 million, which is about 19% of public
revenues and a quarter of development expenditures.
Donor funding has declined in recent years and has
sometimes been subject to a degree of unpredictability, however Ethiopia
remains by far the biggest recipient of aid in Africa in nominal terms.
This mainly reflects Ethiopia’s critical geopolitical
role in the Horn of Africa, a region characterized by political instability.
The large aid inflows also result from the notable impact of donor funds on key
social indicators such as access to education, health, and water.
The fourth feature of Ethiopia's effective
developmental leadership is that the public spending has been pro-poor.
Ethiopia's budgetary apportionment for the poor has
been the highest in Africa. The pro-poor governmental expenditure has been
around 13% of GDP in the past decade, which is significantly beyond the
regional peers. Pro-poor expenditure has been made a main government priority
in all developmental programs.
These essential features resulted in the extraordinary
success achieved in the past decade. Ethiopia became the seventh largest
economy in Africa.
The real GDP growth rate averaged 10.1 percent, while
the rate for agriculture, industry, and services have registered an annual
average growth rate of 6.6 percent, twenty percent and 10.7 percent,
respectively. That is double the growth rate registered in sub-Sahara Africa in
the first half of this decade, which was an average growth rate of about five
Indeed, Ethiopia's developmental leadership has been
successful in achieving the challenging objective of achieving significant GDP
growth, while maintaining macroeconomic stability. Inflationary pressure was effectively
controlled through effective policy and administrative measures. According to
the report by the Central Statistical Agency, the general inflation rate for
the final year of GTP (2014/15) is estimated at 9.5%. Both internal and
external factors contributed to the inflationary pressure.