Ethiopia Economic policy

By | February 1, 2021

Economic policy

Public and private investment

Banking and insurance are only accessible to national investors.

In other areas such as the textile and leather industry, but also industrial agriculture, the Ethiopian Investment Agency, which is responsible for promoting and facilitating private – especially foreign – investments, has very successfully attracted investors from all over the world. The Ethiopian government’s interest in Ethiopia as an investment country was primarily aroused by the favorable conditions such as low rents for land.

The state is still the largest investor in Ethiopia. Despite the partial liberalization of the economy, which in 2018 under Prime Minister Ahmed Abiy journey has taken, the state so far in the industrial and service sector remains by state monopolies (aviation, telecommunications, energy) of the dominant actor.

National debt and inflation

According to clothesbliss, Ethiopia is a country located in Eastern Africa. The state budget is in deficit and can only be covered by external as well as internal debt. Due to massive debt relief, the debt dropped drastically in 2004/2005, but since then the debt has increased tenfold and represents a massive challenge.

The high rate of inflation is always a problem. In 2011 prices exploded with an inflation rate of over 35 percent. In the following years it was able to be kept constant below 10%. The year 2019 ended Ethiopia with the highest inflation rate since 2012.


In a bank in Addis Ababa

In a bank in Addis Ababa


The most important sales markets for Ethiopian products are China, the USA and Switzerland.

The main export is coffee. Already 1500 AD. was coffee in Ethiopia a commodity. In the late 16th century, coffee cultivation spread from the south-west of the country towards the north. In the early 17th century there were already plantings near Lake Tana. At the beginning of the 19th century, coffee was being cultivated in many parts of the northwest.

Coffee harvest in the forest

Coffee harvest in the forest

Ethiopia is still home to a great variety of wild coffee bushes. It is estimated that an area of over 500,000 square kilometers is covered by (wild and cultivated) coffee trees. With an annual production of over 400,000 tons, the country is the fifth largest coffee producer in the world. The plan of the Ethiopian government to soon become the second largest coffee exporter in the world is viewed critically by producers and traders in the considerable Ethiopian coffee market.

Roses packaged for transport

Roses packaged for transport

The cut flower production, which started late in the African comparison, was built up and operated at world market level. It is still one of the fastest growing export-oriented industrial fields in Ethiopia, although it brings with it not inconsiderable ecological and social problems. In this area, Ethiopia now ranks second behind Kenya.

The cultivation of khat (also chat, kat or qat) is of great importance both for the domestic market and as an export good. The plant is used as a light intoxicant in East Africa and Yemen and is enjoying growing popularity.

Ethiopia has the largest water resources in East Africa. Fourteen major rivers, including the Blue Nile, flow through the country. Only a fraction of these resources are used, but increased use – above all of hydropower to generate electricity – is being massively promoted. The best-known projects in this context are the Grand Renaissance Dam and the Gibe III Dam, with the help of which Ethiopia wants to become the region’s most important electricity exporter.


Among the countries of origin of Ethiopian imports, China (33%), France and India are in the lead. There are also lively economic relations with Germany.

Imported goods are mainly machines, fuels, food and textiles. Ethiopia imports far more than it exports. In 2017, goods worth more than 16 billion US dollars were imported.

Development and development policy

Ethiopia is one of the poorest countries in the world. The per capita GDP of 2022 dollars (adjusted for purchasing power, in international dollars, World Bank estimate 2018) is well below the African average. About 29.6% of the population live below the national poverty line (2014). Due to climate disasters and conflicts, meeting the population’s food needs continues to be an immense challenge. Ethiopia receives international aid all year round. Several million Ethiopians are permanently threatened by food shortages, their existence is directly dependent on external support.

Since the beginning of 2015, the lack of rain (effects of the “El Ni ñ o” phenomenon, which was very pronounced in 2015) led to the greatest drought in recent decades. In 2016, experts reported more than 10 million people (some sources even put it as close to 20 million) who were dependent on food aid. In 2017, Ethiopia was also affected by drought, crop failures and food shortages due to the lack of rain. In 2018 and 2019 it was primarily violent conflicts that led to an increase in the number of food aid addicts. According to government figures, there were over 8 million people in 2019.