Ethiopia’s Economy from an Historical Perspective

By Shiferaw Jamo

Abstract

Ethiopia’s rapid economic growth in recent years must be seen in the background of economic stagnation for over one-half century when the country experienced diverse regimes and systems, including monarchism (1941-1974), socialism (1975-1991), and a market-oriented system driven by neo-liberal policies (1992 004). During the period its record of economic planning as a tool for economic management, as well as its relations with developed countries, both East and West, and multi-lateral institutions, supposed to be partners in development, failed dismally in lifting the country from extreme poverty.

The economy began to show rapid and sustainable growth after the adoption of what has come to be known as developmental state. Drawing on the experiences of countries such as China and countries in East Asia, Ethiopia embraced the developmental state model as the strategy for accelerating the growth of its economy, and for eradicating poverty beginning in 2005. In stark contrast to over half a century of stagnation, the economy has since been experiencing double-digit and broad-based growth sustained even in the face of intermittent political upheavals in recent years, as well as persistent and severe droughts said to be the worst in the country’s history. Based on the growth record of the economy spanning over half a century, this paper concludes that any decision to deviate from the developmental state growth trajectory is bound to have catastrophic consequences.

1. Introduction

This paper presents a review of the macro-economic performance of Ethiopia’s economy from an historical perspective. The economy’s rapid growth in recent years must be seen in the background of well over half a century of stagnation under different systems and regimes-feudalism (1941-1974), socialism (1975-1991) and neo-liberalism (1992-2004)-with quantum leaps from system to system^[1]. The country’s record of economic planning as a tool for economic management and its relations with developed countries, both east and west, and multi-lateral institutions, supposed to be partners in development, failed dismally in lifting the country from extreme poverty. Rapid and sustainable growth of the economy only began in 2005 after the country embraced the developmental state model.

Focus will be made on the structure of production in terms of the gross domestic product (GDP^[2]), which is the single most important summary measure and indicator of success or failure in the attainment of development policies, strategies and macro-economic management in general. While the rate of growth of domestic output is an important indicator of economic progress, or failure, it should nevertheless be emphasised that the growth of output should be seen not as an end in itself, but rather, in terms of attaining development goals and objectives, which are growth with equity, reducing and eventually doing away with poverty, and improving the quality of life for the population.

It is hoped that this brief review of the economy will provide a useful framework for informed judgment in reference to the growth record of Ethiopia’s economy under successive governments and systems. With Ethiopia’s economy at the cross-roads, it is also hoped that it will help in the choice of an appropriate development policy and strategy.

2. The Feudal Era

Immediately after the end of fascist occupation in 1941, Ethiopia was amongst the poorest countries in the world. According to available information, upon the end of fascist occupation, the structure of the economy was unchanged from what it had been for centuries, except for a few kilometres of roads and small-scale manufacturing. In the aftermath of the departure of fascist forces, the economy was at the lowest ever subsistence level, with low levels of production, distribution and consumption. After putting in place the requisite administrative machinery and related services, the government of Emperor Haile Sellasie embarked on modernising the country by giving priority to economic development based on centrally-administered plans. The exercise in planning was preceded by series of sectoral programmes which included industry, agriculture and forestry, road construction and maintenance, education, transport and communications

The first sectoral programme—the ten-year industrial development programme–was put together in 1945 by the United States Technical Assistance Mission, the precursor of that country’s involvement in Ethiopia that was to last until the revolution of 1974. Implementation of the industrial development and subsequent programmes and plans depended mainly on technical and financial assistance from the United States and the World Bank, but also other western countries^[3]. Separate programmes were subsequently prepared for agriculture and forestry in co-operation with the United Nations Food and Agricultural Organisation. In transport and communications, a four-year programme (1952-1956) was worked out for the rehabilitation and extension of the road network. A programme for the improvement of the country’s telecommunications network was also prepared early in the 1950s, and a ten-year programme for the development of education was elaborated during this period.

Ethiopia may, therefore, be said to be amongst the earliest countries that adopted planning as an instrument of economic management. With the preparation of the first five-year plan in the mid-1950s, the country shifted to a system of comprehensive planning with a series of five-year plans. The task of preparing plans was entrusted to the National Economic Council, set up in1954, comprising a Planning Board, a policy-making body and a secretariat, the Office of the Planning Board. In 1956, the Planning Board began to experiment with comprehensive planning in earnest by initiating the first five-year plan. The plan was prepared by a team of experts from former Yugoslavia, assisted by a handful of Ethiopian counterparts.

Prior to the preparation of the plan, the Yugoslav experts went about collecting whatever statistical information were available to help in plan preparation. Their preliminary assessments included (a) a preliminary assessment of the existing economic conditions; (b) a review of government policies; (c) proposed public expenditures by sectors; (d) private sector development; and (e) a macro-economic projection of the economy as  a framework. The State Bank of Ethiopia also helped in preparing a system of national accounts which, even though admittedly crude, provided a useful input for formulating the first and subsequent plans. For the purpose of planning, estimates of GDP were put at US$1.5 billion in 1950, US$1.7 billion in1954, and US$1.8 billion in 1957^[4].

Before the Revolution of 1974, a total of three five-year plans were prepared and the fourth was nearing completion but was overtaken by the events of 1974. The first-five year plan was originally prepared to cover the period 1957-1961. However, since the plan became effective only in 1958, it was extended for six months up to 1962. The major objectives of the plan were: (a) to promote the development of physical infrastructure as a prerequisite for accelerating economic growth; (b) to develop social infrastructure in the form of education and health, and to devote particular attention to the training of human resources for implementing the plan; (c) to modernise agriculture; and (d) to raise industrial production based on locally available raw materials to meet the requirements of the domestic market. The gross national income was projected to increase by 3.7 per cent annually. The total investment of 674 million birr was said to have reached 840 million birr, surpassing the projected investment by 25 per cent. The plan was later extended to 1962, ostensibly because of the havoc wrought by the closure of the Suez Canal in1956 following the Anglo-French attack on Egypt, spearheaded by Israel.

During the first plan, the gross national product was said to have increased by 3.2 percent annually as against the projected figure of 3.7 per cent. Some of the shortcomings in implementing the plan included low levels of saving, shortages of skilled human resources, including administrative and managerial personnel, and the inexperience of the administrative staff as a whole. The plan was drawn up without the participation of concerned government departments and agencies, with no coordination between investment programmes, and was devoid of bankable projects. It remained unpublished and even confidential. The first five-year plan could only be considered as the preparatory phase for more elaborate future plans. The Planning Commission could hardly be said to have assessed the performance of the plan, largely because of the dearth of administrative and technical capabilities, so that achievement of planned targets could only be taken with a pinch of salt, particularly because of the absence of statistical data.

The second plan (1963-67) was conceived within the framework of a twenty-year perspective plan covering the period up to 1982, with per capita income projected to rise from about 100 birr in 1962 to 188 birr in 1982, the last year of the fifth five-year plan. The  plan’s  long-term  goal  was  to  bring  about  a  “structural  transformation”  of  the economy from a predominantly agricultural base to an industrial and agro-industrial one by accelerating agricultural development and expanding the economy’s productive capacity. The planned investment of 1.7 billion birr was said to have been surpassed by 13 per cent, and stood at 1.0 billion birr. The plan’s projected average annual GDP growth rate was put at 4.3 percent, slightly higher than that of the first plan, with agriculture and manufacturing expected to grow at rates of 2.5 per cent and 27.3 percent, respectively. Implementation of the second plan continued to be hamstrung by the same factors that constrained the effectiveness of the first plan.

Preparation of the third plan was preceded by upgrading the Planning Board to the Ministry of Planning and Development in 1966, and subsequently to the Planning Commission Office in its final years of existence. The re-organisation was the result of recommendations made by an Administrative Reform Committee set up towards the end of the first plan, the objective being to modernise the administrative machinery for overcoming shortcomings in plan formulation and implementation.  The third plan covered the period 1968-1972, but was extended by two years up to 1974, amongst official reasons being the unfavourable developments in the external economic environment, including the instability of the international monetary system after the abolition of the gold standard in 1971, coupled with the steep rise in global oil prices in 1973^[5].

The third plan had, amongst its objectives, the promotion of manufacturing and agro-industrial development by enhancing the productivity of peasant agriculture, and expanding educational opportunities. The projected annual rate of GDP growth was put a t6 per cent, with agriculture projected to expand by 2.9 per cent and manufacturing industry by 14.9 per cent, respectively. The planned investment was projected at 3.1 billion birr. Even though the third plan was extended by two years, the economy only stagnated up to 1973/1974, with GDP growth averaging 2.1 per cent, and a paltry 0.3 per cent in per capita terms. Agricultural GDP declined from 2.2 per cent between 1968/69 and 1971/72,  and from 0.7 per cent in 1972/73 to a negative 0.6 per cent in 1973/74, obviously on account of the catastrophic drought which had been lingering all along. On the eve of the revolution of February, 1974, the Central Planning Office, which had been working on the fourth plan (1974/75-1978/79) for months on end, had wrapped up its final draft, but  the exercise turned out to be futile having been taken over by events.

In spite of nearly two decades of planning under the feudal system, the Ethiopian economy remained stagnant throughout. Failure of the plans was due, in large measure, to the feudal mode of production, which obviously was an antithesis to a system of planned development. But it was also due to the shortage of skilled personnel, scanty statistics, a backward and highly inefficient feudal bureaucracy, and recurrent droughts and famine, there being three such occurrences during the period of the plans: 1957-1958, 1964-1965 and 1972-75. Hostilities in Eritrea that began soon after abrogation of the federal arrangement in 1962^[6] also played no small part in absorbing the country’s scarce resources

On the eve of the revolution of 1974, and in spite of three five-year plans, the Ethiopian economy showed little change and remained stagnant. Characteristic of a stagnant economy were undeveloped social and physical infrastructure such as health and education, water, electricity and communications which were concentrated in major urban centres. Telephone services to rural areas were almost non-existent, and the production of electricity was a mere 210 megawatts (inter-connected system). The road network, the major mode of transportation, consisted only of an estimated 23,000 km, of which about 8,600 km were all-weather roads and only 3,000 km asphalted. Illiteracy stood at a whopping 93 per cent, primary enrolment at about 10 per cent of the school-age population, health coverage at about 15 per cent (with an estimated population per physician of 74,000), and the average life expectancy stood at 38 years. The per capita income for an estimated population of 28 million then was put at US$80 –the lowest in the world.

The 1973/74 drought (referred to as “the hidden hunger”) which uprooted the peasantry, exacerbated  by mounting social and political contradictions, kicked off a nation-wide uprising involving all segments of the population, including the Confederation of Ethiopian Labour Unions with an estimated membership of 80,000 that protested against rising prices; students who demonstrated under the motto, “land to the tiller”; teachers who called a strike in opposition to the World Bank initiated education sector review; the Muslim population that rose en masse against institutionalised religious oppression; transport workers who went on strike because of mounting gasoline prices that  rose from 0.35 birr a litre to 0.45 birr a litre; and the military establishment that refused to obey orders  in some key units on account of the abysmally low salaries of  men in uniform who were being  paid between 30 and 50 birr a month, as well as  soldiers and lower ranking officers being forced to live under harsh living conditions. 

The mass movement led to the resignation of the government of Prime Minister Aklilu Habtewold in February of 1974 and its replacement by a new government of Lij^[7] Endalkachew Mekonnen the same month. The uprising was spontaneous, leaderless, and was fuelled only by harsh economic and social conditions that then prevailed. As the only effective organised force, the military took no time in filling the political vacuum and established what was called a Coordinating Committee of the Armed Forces, the Police and Territorial Army (later the Dergue) comprising some 120 members in June, 1974. The military skilfully went about dismantling the feudal bureaucratic structure by placing under detention its leading members beginning with the entire cabinet of the government of Aklilu Habtewold,  followed  by  the  arrest  of  the  newly  appointed  prime  minister, Endalkachew Mekonnen, in August of 1974^[8]. The Dergue continued to consolidate its hold on power by establishing what it called the “Provisional Military Administrative Council (PMAC)”, later  the Provisional Military  Government of Socialist  Ethiopia PMGSE^[9], arrested Emperor Haile Sellasie himself^[10] on September 12, 1974, suspended the 1955 constitution, which vested despotic powers in the Emperor, dissolved the Parliament and took over direct control of the government. Having overthrown the Emperor, the PMAC assumed the functions of head of state, having defined the duties and functions of its Chairman^[11], Lt. General Aman Mikael Andom, who was called from retirement to head the Dergue as its chairman.

3. The Socialist Era

Veered  towards  the  left  by  the  ideological  orientation  of  the  mass  movement, particularly students, buttressed by fledging political groupings of all description that sprang up at the time, the PMAC declared “Ethiopian Socialism” as its guiding ideology in December of 1974.  In order to implement this ideology, the country’s economic resources had to be brought under public ownership, feudal institutions had to be dismantled in their entirety, and an entirely new social and political order had to be put in place as quickly as possible. Therefore, following the declaration, several other reforms had to be undertaken in quick succession. The “Economic Policy of Socialist Ethiopia” was issued during the first week of February, 1975, nationalising what it called the “commanding heights” of the Economy including banks, insurance companies, manufacturing and commercial  enterprises.  

According to the proclamation, activities that were not harmful to the interest of society were, however, left to the private sector or for joint-venture undertaking with private investors. The proclamation further delineated economic activities between the  state  sector,  the  private  sector  and  foreign  investors.  Some fourteen activities were reserved solely for the state, about eight activities were identified for public and private capital (including foreign capital), and other activities were set aside for the private sector, “subject to government control”. The declaration emphasised that “state ownership (of resources and sectors of the economy) was not only necessary but a pre- condition for any meaningful improvement in the general standard of living and welfare of the large majority of the Ethiopian people…”

The land reform legislation, which made rural land the collective property of the Ethiopian peoples, followed in March of 1975. The nationalisation of rural land included commercial farms which would either be distributed to peasant farmers, or placed under state control. A maximum ceiling of 10 hectares was declared to the size of land to be allocated to individual peasants. The legislation further provided for the formation of peasant associations^[12] with provisions for self-administration and the defence of the reforms as well as to ensure  mass participation  in the development process. The land reform legislation was followed by the mobilisation of some 60,000 students who were dispersed throughout the country to help peasants organise themselves into peasant associations and help m implementation of the directives of the land reform. The proclamation was supported by a massive demonstration estimated at over 800,000 participants. The rural land proclamation terminated, at a stroke, feudal relations of agricultural production–the major cause of the country’s economic backwardness–and administered a coup de grace to feudal rule.

The other measure taken was the nationalisation of urban land and extra houses in July, 1975.  The urban land proclamation allowed each family to retain one house for its own occupation and transfer all rented out houses to the state.  Rent reductions were made ranging from 15 to 50 per cent, with rent reduction biased in favour of low income occupants. The proclamation also called for the establishment of urban dwellers’ associations (or kebeles) which were to administer rents below 100 birr per month and serve as basic units for urban administration, and carry out political and local development functions.

During its second year in power, the PMAC made further refinement to the declaration of socialism by issuing the programme of the National Democratic Revolution (NDR) of April, 1976, according to which the guiding principle of the government was to be Marxism-Leninism, the long-term goal being building a socialist society under what eventually came to be known as the Workers’ Party of Ethiopia, which was established in 1984. The NDR was meant to create the technical and material foundations for socialism during the interim period by laying down a system of planned development. Among other things, it provided broad guidelines for the elaboration of a ten-year “perspective” plan covering the period 1984/85-1993/94 in order to put the economy on the path of planned development.

Economic planning continued under the PMAC, this time in the form of a centrally planned economy, consistent with the ruling ideology under the existing Planning Commission Office, which was re-named the Central Planning Commission in 1978, and the National Revolutionary Development Campaign and Central Planning Supreme Council (later Office of the National Committee for Central Planning) in 1984. The latter began its task with a series of annual programmes starting in 1978/79, termed development campaign programme which essentially constituted annual investment programmes integrated into annual budgets, after having put in place a system of monitoring and evaluation based on annual progress reports. The immediate objective of the programmes was to rehabilitate the economy and restore it to its pre-revolution level. The programmes were pursued over a six-year period and lasted up to 1983/84, with the GDP experiencing an average decline of 2.9 per cent during the period.

The ten-year perspective plan focussed on the development of agriculture as the foundation of the country’s economy, and of industry as the leading sector. The ten-year plan was intended to replace the annual programmes, and was itself divided sequentially into two- three- and five-year plans–the first two-year period (1984/85–1985/86); the second three-year period (1986/87–1988/89); and the last five-year period (1989/90–1993/94). Each of these phases was an integral part of the perspective plan with one dovetailing into the other.

The macro-economic objective of the plan was to increase GDP growth by an average of 6.5 per cent annually. This would result in an increase in the level of GDP from 8.4 billion birr in 1983 to 15.8 billion birr by the end of the plan. In order to achieve the projected rate of GDP growth, agricultural GDP was to increase at an average rate of 4.3 per cent a year, industrial GDP at 10.8 per cent, and the services sector at 6.9 per cent. These were to be attained with an investment estimated at 32 billion birr over the plan period. The plan was supposed to address itself to the country’s basic development problems.

The first phase of the perspective plan, the two-year programme, coincided with the severe drought and famine of 1984-1985, the like of which the country never experienced before. It encompassed twelve of the country’s fourteen administrative regions, affected some eight million people, one million of whom were said to have perished. Consequently, the two-year programme was ill-fated right from the start with GDP declining by 3.7 per cent in 1983/84, which further dropped to 6.7 per cent in 1984/85. The plan was subsequently scrapped in favour of what was termed an “Action Programme” adopted by the government with the capital budget being subjected to cut-backs in favour of emergency-oriented programmes.

The three-year programme was launched in 1986 with a projected average annual GDP growth of 6.3 per cent. The total investment envisaged was 5.7 billion birr. It was launched under a favourable economic environment with improvements in weather conditions which resulted in bumper harvests, on the domestic front, and high coffee^[13] and low petroleum prices^[14] on the international front, giving the economy prospects for a speedy recovery and growth in  the years ahead. Upon emerging from the drought, the economy appeared poised for achieving rapid recovery and sustained growth. As a result, GDP registered a high growth of 6.7 per cent in 1986/87, the base year of the plan. The expected economic recovery became short-lived, however, for even as the economy was struggling to gain momentum, hopes that it would resume normal and steady growth were dashed with the appearance of yet another, albeit modest, drought in 1987.

To make matters worse, the favourable conditions that provided positive stimuli for growth in 1986 disappeared altogether. Sharp drops in coffee prices, increases in petroleum prices coupled with the drought threw the economy off balance, so that it could not be possible to sustain economic recovery. Therefore, the three-year programme suffered reverses in its second and third years of implementation (1987/88-988/89). As in 1984-85, the drought affected agricultural production which dropped by 8.6 per cent in 1988/89, and was aggravated by mobilisation for war and the diversion of resources, including farm hands, to the war effort.

The three-year programme coincided with the declaration of the People’s Democratic Republic of Ethiopia in September of 1987, followed by ratification of the constitution and the appointment of the President of the Republic and the Prime Minister.^[15] The three-year programme also witnessed intensification of the war to the north, giving rise to the declaration of a state o emergency. The country was placed on a war footing with the slogan “all to the war front”, and an all-out mobilisation was decreed. Following the decree on national mobilisation, retired soldiers, peasants from the countryside and urban unemployed youths^[16] were whisked through short training at  various camps  and shipped off to the war front.

Military expenditure, which persistently absorbed no less than 50 per cent of the current budget (and 15 per cent of the GDP) shot up to 60 per cent of the national budget of about 3 billion birr in 1990 (close to 20 per cent of the GDP). But there also was a serious depletion of foreign exchange because of declining exports, which dropped substantially to less than 8 per cent of the GDP in 1987/88, and dropped even further the following year, all of which rendered he outlook for the five-year plan bleak right from the start.^[17] Even as the three-year plan was coming to a close, the government embarked upon elaboration of the five-year plan (1989/90–1993/94) which was the last phase of the ten-year plan. Its major objectives, which were no different from its previous components, included the promotion of agricultural development and the attainment of food self-sufficiency, increasing earnings of foreign exchange, expanding employment opportunities, and soil and water conservation to withstand environmental degradation. With mounting hostilities in the north, and the diversion of the budget to the war effort, the financial crisis continued to deepen with worsening budget deficit resulting in serious macro-economic imbalance.

Even though the first draft of the plan was expected for submission by the end of June, 1988/89, the focus of the government began to shift increasingly towards the war, with the plan receiving less and less attention. Government officials who, it appeared, were reading the writing on the wall, were becoming jittery and more concerned about their personal safety and security, and the bureaucracy was gradually gliding towards paralysis. Driven by the deepening economic crisis, but also due to changes in the global political environment, the government tried its hand at economic reform in its last days^[18]. The first major attempt at policy reform came following the resolutions of the 9^th Plenum of the Central Committee of the Workers’ Party of Ethiopia in November, 1988. Legislations to promote private participation in small-scale industry, hotel and joint venture were proclaimed. A joint venture proclamation was issued in July of 1989, followed by a special decree on investment of May, 1990, which was issued by the State Council. The investment decree defined the areas of investment open to investors and the incentives to which they were entitled. Private investment, including foreign investment, was encouraged without restriction on size and in all sectors except in a very few cases, such as public utilities, banking and insurance for which prior authorisation was required from the Council of Ministers. The economic situation continued to deteriorate, however, and the government collapsed in May of 1991before implementing the reforms.

Already structurally deficient and backward, the economy’s decline continued unabated for sixteen years, and reached a critical stage during the last years of the military government. Trends in growth performance up to the mid-1980s were erratic but generally downwards. GDP began to fall persistently with growths of 1.9 per cent in 1988 and 1.6 per cent in 1989. It further declined to minus 1 per cent in 1990 followed by an even steeper decline of minus 5 per cent in 1991, which was a record low since the 1984-85 drought. During the decade of the 1980s, the annual rate of GDP growth averaged less than 2 per cent with no changes in the structure of the economy for decades. With population growth averaging 2.9 per cent, per capita income was also declining during these years. The fall in per capita income during the period 1988-1991 averaged 3.7 per cent annually. It continued to decline to minus 3.8 per cent in 1990, and further decelerated to minus 8.5 per cent in 1991. Declining per capita income obviously meant pauperisation of the population with persistent decline in living standards.

Other than the decline in the GDP, all macro-economic indicators, such as the rates of investment and savings, the balance of payments and foreign exchange reserves, government revenue and expenditure and the modes of financing, and the money supply and credit, unemployment, inflation and the conditions of infrastructure worsened on the eve of the overthrow of the military government. Consistent with the country’s low per capita income, which was estimated at US$120, were undeveloped social and economic indicators in health and education, such as high infant mortality, low life expectancy (47 years) with less than a third of the population under coverage of basic health services, and an estimated population per physician of 77,000; low primary, secondary and tertiary level school enrolments (35 per cent, 18 per cent and 1 per cent of the eligible school-age population, respectively), a mere 16,000 km of road network which was no easily accessible to nearly 75 per cent of peasant farmers; and water, electricity and communications services continued to be concentrated in major urban centres, as in the past. The production of electricity increased to 360 MW but still remained extremely low for an estimated population of 52 million. Illiteracy dropped to some 60 per cent, to the credit of the military government, which launched a national literacy programme beginning in 1979 with the aim to eradicate illiteracy. Successive literacy programmes increased the literacy rate from 7 per cent in the mid-1970s to an estimated 60 per cent by the downfall of the military government in 1991.

4.   The Era of Neo-liberalism

The Transitional Government of Ethiopia (TGE)^[19], which was constituted soon after the downfall of the military government, inherited not only an economy in ruins but also virtually empty coffers, with little or no money in the banking system, including foreign exchange. Manufacturing activities came nearly to a halt, and much of the infrastructure suffered severe damage due to the war and neglect. The problem was compounded by social problems involving millions of displaced persons, refugees and the homeless, and a large number of demobilised soldiers aimlessly roaming the streets of the capital. The social and economic problems inherited were so deep-rooted that nothing short of sweeping changes would bring about economic recovery and growth. While the end o the war and the restoration of peace certainly constituted positive developments that would contribute to a turn-around in economic performance, the question was, given the dire economic and social situation,^[20]what could be the prospects for the country’s economy under the new government?

In answer to this question, the TGE immediately set about initiating a series of policy reforms and regulatory changes with the aim to halt, and eventually reverse, economic decline, that is, to first stabilise the economy and bring about structural reforms. Its strategy for economic recovery and growth comprised policy and institutional reforms encompassing fiscal, financial, exchange rate, trade and industry, and management of public resources and enterprises. From this perspective, the TGE had to accomplish three equally daunting tasks. One was to resuscitate the economy and place it on the path of sustainable growth; the second was to bring about systemic/structural changes in the economy, that is, from a “centrally planned” to a “market-driven” economy. The third was to introduce far-reaching reforms in terms of macro-economic stabilisation and growth. The major thrust of the reforms was to move away from a centrally- planned economy to an economy driven mainly by market forces. On the social front, the TGE embarked on rehabilitation of those uprooted and most severely affected by the long drawn-out conflict.

The policy objectives of the new government were set out in a document entitled “Ethiopia’s New Economic Policy (NEP)” for the transition period. The draft policy paper was made public in August, about two months after the formation of the Transitional Government. It was widely discussed in government, political and private circles. The policy stressed the need for placing both rural and urban lands under state control, the status of rural lands being subject to decisions by the rural population after elections. On the other hand, the policy gave further emphasis to private participation in all sectors of the economy. In agriculture, the private sector was to play a decisive role with state participation being limited to a handful of modern farms to be managed jointly with local or foreign private capital. In industry, as in mining and energy, state participation would be limited to large-scale undertakings under joint venture arrangements with local or foreign private capital. Excepting commodities that cut across sectors, foreign trade was to be left to private capital, with quantitative restrictions being replaced with tariffs. The NEP emphasised the need to revitalise the economy, to limit the role of government, enhance private sector investment and promote appropriate macro-economic policies.

On the basis of the NEP and other developments, an agreement was arrived at with multi-lateral and bilateral development partners on an emergency recover programme–the Economic Recovery and Re-construction Programme (ERRP)–in the context of which the government obtained aid amounting to some US$660 million. The ERRP was intended to restore social and economic infrastructure as an essential first step for bringing about economic recovery and growth. In order to ensure a speedy economic recovery and to embark upon a long-term growth programme, the ERRP was to be implemented over a period of two-and-a-half years. It went into operation immediately after approval by the World Bank in 1992, and may be said to have been the preparatory phase for the introduction of the structural adjustment programme.

Following the ERRP, which was intended to lay the foundation for economic recovery and growth, the TGE had to adopt, in the early 1990s, the structural adjustment programme (SAP) of the World Bank and the enhanced structural adjustment facility (ESAF) of the International Monetary Fund. An agreement was first arrived at regarding what was  called a  policy framework  paper (PFP)  covering the period 1992/93  to 1994/95 which marked the first phase of the adoption o the SAP as the basis for securing structural adjustment credit for long-term growth. The TGE had to succumb to the SAP, which had staunchly been resisted by the previous government, and Ethiopia joined the rank of countries that adopted the SAP in Africa and elsewhere.

The harmful consequences of the SAP were not lost on the new government, but because  the  social  and  economic  crises  facing  the  country  were  far  beyond  the demands imposed under the scheme, their severe drawbacks and negative implications were considered minor when compared to the economic quagmire into which the country found itself submerged in the aftermath of the collapse of the military government. Perhaps, the most dramatic policy reform was the devaluation of the national currency which had been resisted by all previous governments^[21]. That was in October of 1992 when the birr was devalued  by a hefty 142 per cent-from 2.07 to 5.0 birr to the US$.

During 1992/93–1994/95 the economic reform measures undertaken were mainly concerned with lifting restrictions on private sector participation, removal of price controls, institutional reforms, etc. Following the reforms, and in contrast to the economic decline of earlier years, there was economic recovery between 1992/93 and 1994/95. With the exception of 1993/94 when the country was hit by an unexpected drought resulting in a drop in GDP of 1.3 per cent for that year, there generally were improvements in economic performance The apparent growth experienced during this period could be said to have actually been recovery from the economic collapse experienced in the aftermath of the downfall of the previous government. After having put in place policy reforms of a comprehensive nature, the TGE was financially supported by significant external resources, as exemplified by the structural adjustment credit, the first one of which was in excess of U.S$1.2 billion agreed upon during a consultative meeting in Paris of November, 1992. A second structural adjustment credit of about US$1 billion was approved in 1994. Thus, through the policy reforms within the framework of the SAP, the government succeeded in mobilising resources required for economic recovery and growth.

The focus of economic reform began to shift from stabilisation to structural reform, with a more comprehensive structural adjustment programme covering the period 1995/96–1996/98. It included encouragement of domestic private enterprises, improvements in investment incentives for the promotion of foreign investment, tariffs and financial sector policy reforms. As part of the structural adjustment programme, the government launched a three-year Sustainable Development and Poverty Reduction Programme (SDPRP) of 2002/03–2004/05. A development strategy known as the Agricultural-Development-Led Industrialisation (ADLI) which emphasised the productivity of peasant farming based o appropriate incentive schemes using agricultural extension and labour-intensive industrialisation constituted the basis of the programme. ADLI assigned an important role to agriculture for the development of the economy comprising the provision of markets for domestically manufactured goods, and the integration of industry and agriculture, encouraging the development of mechanised farming through the application of appropriate technology and rural infrastructure development. ADLI was a long-term strategy aimed at laying the foundation for achieving faster economic growth by making use of labour-intensive technologies including fertiliser, improved seeds and other cultural practices. The aim was to establish forward and backward linkages between the agricultural and industrial sectors to promote economic growth and transformation.

The SDPRP was followed by what was termed a Plan for Accelerated and Sustained Development to End Poverty (PASDEP) covering the period 2005/06–2009/10. This was the first comprehensive plan under the new government. The planning agency was re-organised as the Ministry of Planning and Development and was merged with the Ministry of Finance. Despite the plans and programmes, economic stagnation continued during the decade of the 1990s with minus 5.6 per cent in 1991. GDP decline continued well beyond the 1990s with records of -1.0 per cent in 2002 and minus 3.3 per cent in 2003. In general, during the first decade after the country’s transition to a market-based system (1992-2003), per capita GDP growth averaged a mere 1.3 per cent. Amongst factors accounting for the low performance of the economy during the period were the time required to put in place systemic changes from socialism to a free-market system following the demise of the military regime, series of droughts during the 1990s and hostilities with Eritrea (1998-2000).

5.  The Developmental State Years

PASDEP eventually gave way to a truly home-grown plan–-the Growth and Transformation Plan (GTP) of 2010/11–2014/15–the second phase of which is under implementation at present. It represented a scaling up of ADLI, also a home-grown programme. Up until then, and beginning with the country’s first industrial development programme of 1945, prepared by the United States Technical Assistance Mission, all previous plans and programmes were under the direct or indirect influence of bilateral or multilateral agencies some of whom, paradoxically, consider state-driven economic planning anathema. The current GTP aims at promoting industrialisation even while continuing, as in the first GTP, the modernisation of agriculture. The overall objectives of the GTP are to bring about structural transformation, its vision being attaining a middle-income status by 2025. The strategy for attaining this lofty objective was the developmental state model. Drawing on the experiences of countries such as China and others in the Far East, which are known to have attained sustainable high rates of economic growth, Ethiopia firmly embraced the model as the strategy for eradicating poverty by accelerating the growth of its economy. Ethiopia’s late Prime Minister, Meles Zenawi, was the architect of Ethiopia’s developmental state paradigm. After visiting countries in the Far East, and being impressed by their miraculous economic performance, he became convinced that state-driven development was the only way to extricate the economy from decades of stagnation, and the population from primordial poverty. He argued vehemently, and even passionately, that neo-liberalism had failed miserably to bring about economic development and emancipate Ethiopia and other African countries from poverty.

Based on the developmental state model as adapted to Ethiopia’s characteristics, and in a short span of under a decade and a half, Ethiopia’s economy registered double-digit and broad-based growth with GDP rising to some US$90 billion in 2017/18, and per capita income to nearly US$900. Other macro-economic variables, such as savings and investment as ratios of GDP also registered impressive rises-from averages of less than 5 per cent and 12 per cent, respectively, in earlier years to as high as 24 per cent and 38 per cent, respectively, since 2005. The economy was also beginning to show signs of structural change, with the share of agriculture in the GDP declining from 50 per cent in 2005 to 35 per cent in 2018, and that of industry rising from 10 per cent to 27 per cent during the same period, thus making a significant shift from an agricultural to an industrial base. What is more, the economy’s rapid growth was sustained in the face of intermittent political upheavals as well as persistent droughts of 2016-2017, which were the worst in living memory^[22].

Apart from macro-economic performance, Ethiopia’s economy made no less impressive changes on several other fronts as well, particularly in the area of economic and social infrastructure. Up until 1991, the country’s road network, which is vital for development, was a mere 16,000 km in a country of some 1.2 million sq km, prior to Eritrea’s independence. It deteriorated massively under the military government because of lack of maintenance on account of protracted hostilities. In contrast, the road network has now expanded dramatically to over 127,000 km with access to all-weather roads being reduced to 4.3 km.

The country’s installed electric power (inter-connected system),  which is equally vital for the country’s development, remained at a pathetic 210 megawatts (MW) up to 1974, and increased only to 360 MW during the last years of the military government upon the completion of the Melka-Wakenna hydro-electric scheme whose capacity was put at 160 MW. The available power supply remained inadequate even for a handful of factories, much less for an integrated investment programme as envisaged in the country’s plans. In recent years, the installed power capacity has risen to some 4,300 MW, and the number of people with access to electricity has more than doubled. Another 6,250 MW is expected to be on stream upon completion of the Renaissance Dam which is presently under construction.

In social services as well, particularly healthcare and education where “aid” from western countries was much touted, all basic indicators point to dismal performance. In 1991, for example, primary school enrolment was less than 20 and secondary enrolment just about seven. Regarding higher education, the picture was even more dismal, with only two universities accommodating barely 4,000 students. In glaring contrast to what prevailed in the country before 1991, primary school enrolment has now more than quadrupled, with 100 per cent coverage. Colleges and universities have mushroomed all over the country and are producing tens of thousands of graduates annually, even though, in terms of quality, the educational system as a whole leaves much to be desired. Major progress has also been recorded in all other key human development indicators. Health coverage has expanded to nearly 100 per cent, with health indicators such as child mortality being reduced by one-half and life expectancy rising from 43 years before 1991 to 67 years at present. While the United Nations Millennium Development Goals (2015) clearly shows Ethiopia’s fulfillment of the human development targets, the following quotation from a World Bank report attests to gains the country made under the developmental state paradigm.

Ethiopia’s economic growth has been remarkably rapid and stable over the past decade. Real GDP growth averaged 10.9 percent in 2004—2014, according to official data. By taking into consideration population growth of 2.4 percent per year, real GDP growth per capita averaged 8.0 percent per year. The country moved from being the 2nd poorest in the world by 2000 to the 11th poorest in 2014, according to GNI per capita, and came closer to its goal of reaching middle income status by 2025. This pace of growth is the fastest that the country has ever experienced and it also exceeds what was achieved by low-income and Sub- Saharan African countries in that period. Recent growth was also noticeably stable, as the country avoided the volatility by spells of drought and conflict which had plagued growth in the past^[23].

The above quotation is of interest not only when viewing the Ethiopian economy from an historical perspective, but also because the World Bank and IMF were amongst those vehemently denying Ethiopia’s double-digit growth, until the finally made a turn-around and admitted the contrary as cited above^[24]. As pointed out earlier, this remarkable growth resulted from shifts to the developmental state paradigm. Under the new paradigm, the economy has lifted itself dramatically from decades of stagnation with visible improvements in the incomes and welfare of the population. Higher rates of GDP growth resulted in substantial reductions in poverty country-wide which declined progressively from about 70 per cent before the 1990s, and 44 per cent in 2000, to about 23 per cent at present.

All indications point to the conclusion that, given continued government commitment to the developmental state model, the country’s rate of  GDP growth, and its economic and social infrastructure expansion, will continue into the foreseeable future, and the country will succeed in attaining the objective of becoming a middle-income country by the year 2025, as planned. Also, as a fledgling developmental state, Ethiopia may well be the first country to successfully replicate China’s and East Asian countries’ experiences in structurally transforming its economy on the African continent.

All indications point to the conclusion that, given continued government commitment to the developmental state model, the country’s rate of  GDP growth will continue into the foreseeable future, and the country may succeed in attaining the objective of becoming a middle-income country by the year 2025, as planned. Also, as a fledgling developmental state, Ethiopia aspires to be the first country to successfully replicate China’s and East Asian countries’ experiences in structurally transforming its economy on the African continent.

The rapid transformation of Ethiopia’s economy did not come about simply by itself. In contrast to previous years when the country lacked dynamic leadership with little or no focus given to economic growth, the Ethiopian Peoples’ Revolutionary Democratic Front (EPRDF) rightly recognised the need for rapid economic transformation in order to end poverty. It played a critical role in the rapid expansion of the economy by consolidating state autonomy, control and continuity as well as peace and security. The EPRDF established full control over resources which were channelled to sectors of critical importance. It made massive investment in healthcare and education, as well as in physical infrastructure, which received major shares of the national budget and constituted major components of the GDP. Control over state-owned enterprises, which generated colossal revenues, as well as improvements in the system of tax collection, which rose from about 9 per cent to some 13 per cent of the GDP, also enabled the government to progressively shift towards self reliance regarding investment in social and physical infrastructure. Increased self reliance meant that, when western countries cut off budgetary support^[25], ostensibly on account of human rights violations, the government could neutralise it impacts by relying on its own sources.

6. Concluding Remarks

The major conclusion that needs to be drawn from this overview is that, despite a futile exercise of over half a century in economic “planning” and “aid” both from western and socialist countries, the Ethiopian economy remained stagnant for no less than 60 years. This includes 33 years under feudal rule with dependence on western countries from 1941 to 1974; 16 years under socialist rule with dependence on socialist countries^[26] from 1975 to 1991; and 13 years under neo-liberalism from 1992 to 2004. According to the World Bank report cited above, real average annual per capita growth rates were:  1.5 per cent under the feudal system (1951-74); -1.0 per cent under the socialist system (1974-91); 1.3 per cent under the neo-liberal driven market-based system (1992-2003); and 8 per cent under the developmental state (2005-2014). Rapid and sustainable growth only began in 2005 upon the adoption of the developmental state model, after which Ethiopia’s economy began to transform itself from stagnation to double-digit growth.

In sum, over a span of 70 years, Ethiopia’s economy expanded from an estimated US$600 million in 1950 to just under US$3 billion in 1974, and from US$6 billion in 1991 to US$90 billion at present. During the period, income per capita remained stagnant at about US$100, amongst the lowest in the world, until it rose spectacularly to about US$900 under the developmental state.

In the 1960s, Ethiopia was classified by the United Nations Committee for Development Planning amongst the 25 least developed of the developing countries at the time. Just two years before embracing the developmental state agenda, in 2003, Ethiopia was still the second poorest country in Africa. The extreme poverty of the population, the depth and breadth of which had no parallel in the world, was a reflection of a stagnant economy under diverse regimes and systems that embraced ideologies and development paradigms not tuned to the country’s requirements. After the adoption of the developmental state model, Ethiopia’s economy was growing at the fastest rate and was quickly gathering speed on the way to joining the world’s successful economies.

With the change of government in April of 2018, however, there seems to be subtle but visible trends towards neo-liberalism. Talks of privatising the country’s strategic service sectors–telecommunications, electricity, airways, railways and sea transportation and inevitably banks–that constitute the backbone of the economy bear all the hallmarks of neo-liberal policy prescriptions which, rather than restore macro-economic equilibrium and lift the country from the depths of poverty, only ruin the lives of countless millions on account of their undesirable impacts on social welfare and other programmes. Neo-liberal economic policies also come with undesirable external influence which undermines the essential features of the development state, which are autonomy, control and continuity and loss of independence in general.

State-owned enterprises are lucrative concerns^[27] and multinationals are anxiously waiting in the wings to pounce upon them. They know all too well that, while payments they make for them will be in trickles, profits they extract out of them (and the country) will be in torrents. Ethiopia’s public enterprises are highly profitable and account not only for a significant share of the state budget, but also national savings and investment which have risen dramatically over recent years. Their privatisation means irreversible loss of these benefits to the national economy and cannot be advised under any circumstance.

The Ethiopian economy has historically been subject to structural constraints. Amongst these are undeveloped social and economic infrastructure, backward technology resulting in low agricultural output and productivity, and consequently supply constraints, obsolete and inefficient bureaucracy,  compounded by rampant corruption with decadence in morality in both government and private circles. As an essential component of the developmental state paradigm, a nation-wide programme was launched in 2005 with the aim to modernise and streamline the bureaucracy under the Ministry of Capacity Building, established for the purpose. However, the programme could not be sustained, in part, because the bureaucracy was, and continues to be, predominantly staffed by members of the ruling party lacking in experience, and with dubious or no academic credentials; the Ministry itself was later dissolved. 

Given the above conditions, privatisation of state-owned enterprises will be no panacea for the country’s economic problems and foreign exchange crises. Rather than solve the economy’s deep-rooted structural problems, privatisation will only aggravate economic woes and compound social hardship. Worse yet, it will result in massive and irrevocable losses to the economy, with negative impacts on state budget as well as national savings and investment, because of an incessant outflow of profits in foreign currency. This will obviously undermine economic growth, and even reverse gains made in recent years. But privatisation will also accentuate social hardship, because of hikes in tariffs of utilities arising from the insatiable appetite of private owners for profit. Indeed, the pricing of such vital services should by no means be left to the whims and caprices of private owners.

With regard to neo-liberal policy prescriptions, Ethiopia’s experience amply demonstrates that currency devaluation has been a dismal failure. Contrary to its purported objectives of boosting exports and dampening imports, devaluation only resulted in its opposite, that is, stagnation of exports and hikes in imports. For example, during the five-year period, 2014-2018, earnings from exports stagnated at US$2.8 billion, but then dropped to US2.6 billion in 2019. During the same period, imports averaged US15 billion, leaving a gaping trade gap of over US$12 billion. The foreign exchange crunch continues unabated. Despite the failure of devaluation to attain its purported objectives, the twin institutions, the World Bank and IMF, keep harping on still more devaluation, ad infinitum, it seems, regardless of the harsh pain and suffering it inflicts on the population, arising from inflation that follows in its wake.

Those in power would do well to draw lessons from past experience and refrain from making a strategic error when it comes to public enterprises. Rather than bow to neo-liberal demands, they should pay heed to the growing chorus of voices coming from those genuinely concerned, and staunchly stand by, and consolidate, the developmental state. They should protect publicly-owned enterprises, not least because they have been built up painstakingly with the toil and efforts of the masses of Ethiopia over several decades. Some of these institutions, such as Ethiopian Airlines, have come to assume iconic status for Ethiopia and, indeed, for Africa as a whole, and no government or party should take upon itself the right to pawn them off without the explicit consent of the population.

The growth record of Ethiopia’s economy spanning over half a century points to the conclusion that any decision to deviate from the developmental state trajectory is bound to have catastrophic consequences. In this regard, the decline in GDP growth rate to 7.7 per cent in 2018, which is a clear indication of where the economy is heading, should be of grave concern. The drop in GDP is translated into a slowdown in construction with wide ramifications on related economic activities, such as the cement industry, and a rise in unemployment. A one percentage point of negative growth in real GDP, under Ethiopia’s circumstances, could result in an increase of not less than four percentage points in  unemployment, The decline in GDP therefore means substantial layoffs of labourers, both skilled and unskilled, thus swelling the rank of jobless millions which itself is rising from year to year. The right policy prescription to the government for keeping the economy on the right track, and to create job opportunities on a sustainable basis, should include continuation of extensive public investment in social and economic infrastructure expansion, as in the past, and resuscitation of the construction industry that at present is tottering on the verge of collapse. This includes the private sector as an indispensable partner in development.

Finally, the developmental state trajectory placed Ethiopia’s economy on a high-speed track of growth for joining the ranks of the world’s successful economies. Departure from this proven strategy will not only force Ethiopia’s economy back to the era of stagnation but it will also condemn the population to perpetual poverty.

Advance Review of Ato Shiferaw Jamo’s article

By Professor. Paulos Milkias of Concordia University,, Montreal, Canada

Shiferaw Jamo, who is arguably one of the most respected Ethiopian economists alive today dissects the Ethiopian economy during the last 70 years with rich empirical data analysis, sharp intellect and profound insight. His service has spanned Haile Selassie’s feudal autocracy, the Derg’s Marxist system as well as Meles Zenawi’s developmental state. During this long period, Mr. Shiferaw has served as Minister of Planning for both of the first two regimes and had tendered advice to Meles’ EPRDF Team  that followed the Chinese, the Singaporean and the South Korean approach to development to bring about the fastest economic growth in Africa in less than a decade and a half. Outside of his service to his country, Mr. Shiferaw., had also been Deputy Regional Representative to the World Bank and first Executive Director of the African Development Bank. His new article entitled “Ethiopia’s Economy from an Historical Perspective” slated to be expanded into a book in the near future, draws deep realization and analytical stance from this lofty position and rich experience of more than half a century. His terse analysis of Prosperity Party’s economic successes and failures are eagerly awaited..

[1] It needs to be noted that this categorisation is only in terms of the predominance of production relations and the prevailing institutional and policy framework. Otherwise, the private sector was always dominant in sectors such as agriculture, trade and transport. Historically, the bulk of agricultural production was carried out by peasant farmers who accounted for nearly all the food grains for own and urban consumption as well as for exports. Even during the exercise in central planning (e.g. 1988/89), the share of peasant farmers in the production of crops was 88 per cent, that of co- operatives about 7 per cent, and state farms about 4 per cent.

[2]GDP measures used throughout are inflation-adjusted (also called “real” GDP) which are more stable than those   measured in current prices. GDP measures used in this text refer to constant prices in the early 1950s up to 1974; 1980/81 constant prices up to 1999/2000 and 1999/2000 constant prices subsequently.

[3]According to available statistics, Ethiopia received military aid from the United States (under a military agreement of 1953) amounting to some 475 million birr up to1974—a figure said to be equal to almost half of all military aid extended to African countries in that period–and economic aid (under an economic assistance agreement signed in1951 and the Treaty of Amity and Economic Relations of October, 1953) amounting to about 800 million birr.

[4] Please note that all data are from official sources.

[5] It will be of interest to note that the price of petroleum was US$1.7 per barrel in the fifties, remained steady at US$1.8 per barrel in the 1960s and early 1970s, but then increased sharply to US$9.6 per barrel in 1973 (an increase of over 430 per cent) creating a wave of recession in the global

[6] Eritrea was placed under British administration beginning in 1941 until it was federated with Ethiopia in

1952. In contravention of the United Nations resolution, the federal arrangement was gradually weakened by the feudal government that transformed Eritrea into an ordinary province in 1962

[7] Lij was a title given by feudal families to their offspring.

[8] He was replaced by Lij Mikael Imru who was considered progressive at the time and therefore acceptable to the

Dergue.

[9] The PMGSE was to last until it assumed a civilian garb upon the establishment of the Workers’ Party of

Ethiopia in 1984, followed by a constitution establishing the Peoples’ Democratic Republic of Socialist Ethiopia (PDRSE) in 1987 with Colonel Mengistu nominated as the Secretary-General of the Party and President of the PDRSE

[10]  Hardly a hand was raised in support of the monarch when the imperial order collapsed in September of

1974. The key factor was the defection of the security establishment which, as an instrument of repression, had kept it in power

[11] PMAC chairmen included, first, Lt. General Aman Mikael Andom until he was executed in November of

1974, followed by Brig. General Teferi Benti, also executed in February of 1977, and eventually Colonel Mengistu Hailemariam beginning February, 1977. Let. Colonel Atnafu Abate was appointed as the Vice- Chairman, but he, too, was executed soon afterwards after having been dubbed a “counter- revolutionary” for advocating a mixed-economy

[12] By 1987, there were some 20,000 peasant associations with membership of 5.5 million. Members included tenants, landless workers, and former land owners with less than 10 hectares, each association covering 800 hectares. Local associations were organised under an umbrella organisation known as All Ethiopia Peasants’ Association.

[13]12 The international coffee price which stayed at US125 cents/lb for the better part of 1985 climbed sharply to US260 cents/lb during the first quarter of 1986

[14]Petroleum prices dropped to as low as $10 per barrel in February of 1986, to the delight of oil- importing countries, compared to a weighted average selling price of $28 per barrel in 1985.

[15]The Shengo also approved the country’s division into 24 administrative and five autonomous regions

[16]The mobilisation was the third in a series of similar mobilisations since the revolution of 1974.

[17]Problems were exacerbated by tensions within the government upon what may be called the “Generals’ Coup “which took place in May of 1989 while President Mengistu was on a state visit to the German Democratic Republic (East Germany). The coup was foiled, however, and all the generals had to pay the price – with their lives.

[18]This was a dramatic shift, because anybody who called for reform was branded as counter-revolutionary and an enemy of the revolution. Colonel Atnafu Abate, Vice-Chairman of the Dergue, was killed because of his suggestion of a mixed economy.

[19] The TGE was formed in July of 1991 following a national conference involving rebel forces, mainly the Tigray People’s Liberation Front and the Oromo Liberation Front, and consisted of a Council of Representatives and the Council of Ministers prior to the enactment of a constitution leading to elections within two-and-a-half years.

[20] Economic collapse was characterised by the destruction and degradation of social and physical infrastructure throughout, but especially in the northern parts of the country. The problem was aggravated by demobilised soldiers (over 300,000), large numbers of displaced persons and refugees who had to be accommodated by creating appropriate opportunities and restoring them to normal life. Around nine million people, including those displaced persons, ex-soldiers and their families and Somali and Sudanese refugees, were said to be in need of relief assistance

[21]Beginning in July, 1945, the birr maintained an exchange rate of 2.50 to the US$ up to 1971 when the US$ was taken off the gold standard; it then appreciated to 2.30 birr to the US$ between 1971 and 1973, and further rose to 2.07 birr against the US$ until it was devalued in October.

[22] Drought and famine appear to have been permanent features of the life of Ethiopia’s peasantry, with numerous occurrences being recorded in the country’s history. Between 1900 and 1985, no less than 11 major occurrences were recorded, mostly in the northern regions. Since 1985, there have been no less than four occurrences, this time including other regions of the country. Major droughts in certain parts of the globe are said to coincide with sun spots, or flares, which according to scientists, occur about every eleven years. Given this hypothesis, and on the basis of past records, it is possible to make a near-accurate prediction of droughts in Ethiopia. A well-functioning early warning system, adequate food security, distribution and marketing systems, well preparedness, and other similar policies which have been put in place in recent years have helped mitigate and avert the disastrous consequences of the past years.

[23] World Bank Group, Ethiopia’s Great Run: The Growth Acceleration and How to Pace It, February, 2016.

[24] Quite a few nationals, with some kind of mental aberration, keep referring to the burgeoning construction activities throughout the country as nothing but piles of stones. Those in the right frame of mind, however, look upon them as railways, highways, dams, airports, hospitals, schools, industrial parks, high-rise apartments, condominiums, etc. creating massive employment opportunities.

[25] The World Bank was quick to lift the ban after the change of government in April 2018 and advanced US$1 billion.

[26] The former Soviet Union and its allies in eastern Europe until 1991.

[27]²⁵ Latest profit/figures (gross) for the various state-owned enterprises are: Ethio-Telecom: 37 billion birr (up by 54 per cent when compared to two years earlier); Commercial Bank of Ethiopia: 17 billion birr; Ethiopian Airlines: 9 billion birr; Ethiopian Shipping and Logistics Services Enterprise: 1.7 billion birr; and Ethiopian Electric Utility (revenue): 10 billion birr (expected to more than double when the new tariff structure is implemented in its entirety).

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