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Ethiopia Balance of Payments and Foreign Assistance
Ethiopia has experienced chronic balance of payments
difficulties since l953, with the exception of a few years.
The major factor in the deteriorating balance of payments
was the worsening situation of merchandise trade. The trade
deficit that existed during the imperial years continued to
grow after the revolution, despite the introduction of
import controls. Since EFY l981/82, the value of merchandise
imports has been roughly double the value of exports (see
table 15,
Appendix).
Since l974 there has been low growth in the overall volume
and value of exports. Coffee, Ethiopia's principal export,
accounted for about 60 percent of total merchandise exports,
although this level fluctuated in the 1980s. Coffee exports
reached an all-time high of 98,000 tons in EFY l983/84 but
dropped to 73,000 tons in EFY l987/88. Similarly, coffee
receipts declined as the world price of coffee plummeted.
The share of noncoffee exports has not shown any significant
change. Exports of oilseeds and pulses have declined since
imperial times. Industrial exports consistently contributed
only about 8 percent of the total value of merchandise
exports. In contrast to the slow increase in the volume and
value of exports, imports grew by nearly 7 percent during
the decade ending in EFY l988/89. This trend reflected
Ethiopia's growing dependence on imports and the decline of
foreign-financed investment and domestic savings. A high
growth rate in import prices accompanied the high growth
rate in imports. The result of these deteriorating terms of
trade was a severe trade balance problem.
To finance its trade deficit, the government has depended
on foreign aid. These import finance funds were in addition
to the large volume of development project aid and commodity
assistance the international community has provided to
Ethiopia since the end of World War II. The volume of
official development assistance jumped from US$l34 million
in l975 to US$212 million in 1980 and to US$635 million in
l987. Most external financial assistance came from Western
nations. By the late 1980s, Ethiopia was the principal
African recipient of concessionary funding and the largest
recipient of EEC aid. In l988 Ethiopia received US$l4l
million from the EEC under the provisions of the
Lomé
Convention (see Glossary). An additional US$230 million was
later allocated under the Lomé Convention. Bilateral
assistance, mainly from European countries, also increased
in the late l980s. World Bank lending for various projects
covering agriculture, education, housing, road construction,
and power development reached US$400 to US$500 million by
l988. Despite this aid, however, Ethiopia still received the
smallest amount of aid per capita of all developing
countries. The 1987 per capita aid level was US$14, compared
with a US$23 group average for all developing countries.
Reliance on foreign aid has created economic problems for
Addis Ababa. In 1987 Ethiopia's total external debt amounted
to US$2.6 billion, of which US$2.4 billion was long-term
debt (excluding military debt). Addis Ababa owed more than
one-third of the total to multinational agencies and the
remainder to bilateral creditors. Economists estimated the
EFY 1986/87 cost of servicing this long-term debt to be 28.4
percent of export earnings and projected the figure to rise
to 40 percent of export earnings by l990.
Data as of 1991
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