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Ethiopia The Economy
by Mulatu Wubneh (Associate Professor of Planning at East
Carolina University)
Coffee plant foliage and roasted coffee beans
RESTRUCTURING THE ECONOMY along socialist lines and
achieving sustained economic growth were the two major
economic objectives of the Provisional Military
Administrative Council when it assumed power in l974. After
the 1974 revolution, the pace of economic restructuring was
accelerated by a barrage of legislation. A key part of the
effort to reshape the economy was the implementation of
Africa's most ambitious land reform program, which included
nationalization of both rural and urban land. Most of
Ethiopia's industries, large-scale agricultural farms, and
financial institutions were brought under the control of the
government, and both rural and urban communities were
organized into a hierarchy of associations. Pursuit of the
military regime's second objective--sustained economic
growth--was less successful. Drought, regional conflicts,
inflexible government policy, and lack of confidence by the
private sector seriously affected the economy. Falling
productivity, soaring inflation, growing dependence on
foreign aid and loans, high unemployment, and a
deteriorating balance of payments all combined to create a
deepening economic crisis. In 1990 Ethiopia had a gross
national product of US$6 billion and a per capita income of
about US$120, one of the lowest per capita incomes of any
country in the world.
Following the 1974 revolution, the socialist government
developed a series of annual plans and a ten-year
perspective plan to revitalize the war-ravaged economy.
Although the annual plans helped the regime deal with some
urgent economic problems, such as shortages of food and
consumer goods, decline in productivity, lack of foreign
exchange, and rising unemployment, these plans failed to
move the country significantly closer to attaining its longterm development objectives. In l984/85 (
Ethiopian calendar
year--see Glossary) the military government launched a new
ten-year perspective plan, which represented a renewed
commitment to economic growth and structural transformation
of the economy. However, the economy continued to
deteriorate. In response, the regime introduced several
additional reforms. For instance, the l988 Investment Code
allowed unlimited participation of the private sector in
certain areas of the economy. In January l988, under
pressure from aid donor countries, the government agreed to
restructure agricultural and farm price policies. Finally,
in March l990 President Mengistu Haile Mariam announced the
end of the country's Marxist economic system and the
beginning of a mixed economy. Despite these reforms, the
economy failed to improve.
Data as of 1991
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