Economy Of Ethiopia

The economy of Ethiopia is characterized as a mixed and transition economy, featuring a significant public sector presence alongside growing private enterprise. Historically dominated by state-owned enterprises, the Ethiopian government has been actively engaged in a process of privatizing many of these entities, signaling a strategic shift toward a more market-oriented economic framework. This transition reflects broader economic reforms aimed at liberalizing the economy and encouraging private sector participation, although the government continues to maintain control over several key sectors. Notably, industries such as banking, telecommunications, and transportation remain predominantly under the control of government-owned companies, underscoring the state’s enduring role in critical areas of economic infrastructure. Ethiopia’s economic landscape is marked by rapid growth, positioning it among the fastest-growing economies globally. This dynamic growth is complemented by the country’s status as the second most populous nation in Africa, a demographic factor that both fuels economic potential and presents significant developmental challenges. The government’s privatization efforts have seen many properties and enterprises formerly under state ownership either fully privatized or currently undergoing the process. Concurrently, there has been a notable liberalization of the financial sector, aiming to increase efficiency, attract investment, and foster competition within the market. Despite these reforms, certain strategic sectors—including telecommunications, financial and insurance services, air and land transportation, and retail—are expected to remain under state control for the foreseeable future, reflecting the government’s intention to safeguard critical industries deemed vital to national interests and economic stability. Demographically, Ethiopia exhibits a youthful population profile, with approximately 50% of its citizens under the age of 18. This youthful demographic presents both opportunities and challenges for the country’s economic development. While there have been significant increases in enrollment at the primary and tertiary education levels, the pace of job creation has not kept up with the rising number of secondary and post-secondary graduates entering the labor market. This mismatch between education and employment opportunities necessitates the generation of hundreds of thousands of new jobs annually to accommodate the growing workforce and prevent unemployment from escalating. Addressing this demographic pressure remains a central focus of Ethiopia’s economic planning and policy formulation. In 2023, Ethiopia’s nominal Gross Domestic Product (GDP) was estimated at 156.1 billion US dollars, while its Purchasing Power Parity (PPP) valuation stood at approximately 393.85 billion dollars. The economy is predominantly service-oriented, with the services sector contributing a substantial share of economic output. However, agriculture continues to play a crucial role, employing a significant portion of the population and contributing notably to the country’s GDP. As of 2021, agriculture accounted for 37.5% of Ethiopia’s economic output, services made up 36.25%, and industry contributed 21.85%, illustrating a diversified economic structure with a strong agricultural base complemented by expanding industrial and service sectors. Ethiopia’s main trading partners as of 2019 included a diverse array of countries spanning multiple continents. Key partners comprised China, the United States, the United Arab Emirates, France, the United Kingdom, South Korea, Saudi Arabia, Germany, Japan, Switzerland, the Netherlands, Belgium, Turkey, India, and Egypt. This broad network of trade relationships reflects Ethiopia’s integration into the global economy and its strategic efforts to diversify export markets and attract foreign investment. Despite these connections, Ethiopia ranked 159th out of 190 countries in the World Bank’s ‘Ease of Doing Business’ index, indicating ongoing challenges in creating a conducive environment for business operations and investment. Ethiopia is an active member of several regional and international trade organizations, which facilitate economic cooperation and integration. Among these are the African Continental Free Trade Area (AfCFTA), the Common Market for Eastern and Southern Africa (COMESA), the Intergovernmental Authority on Development (IGAD), and the G24 group of developing countries. Additionally, Ethiopia holds observer status at the World Trade Organization (WTO), positioning itself to engage with global trade governance structures. In a significant development in January 2024, Ethiopia joined the BRICS economic alliance, aligning itself with emerging economies such as Brazil, Russia, India, China, and South Africa, which may enhance its economic diplomacy and access to new markets and investment opportunities. Historically, Ethiopia had a stock exchange during the reign of Emperor Haile Selassie I, known as an ‘ākisīyoni gebeya.’ However, the country currently does not possess an active stock exchange. To facilitate commodity trading and enhance market transparency, Ethiopia operates the Ethiopia Commodity Exchange (ECX), established in 2008 and located in Addis Ababa. The ECX plays a vital role in the agricultural sector by providing a centralized marketplace for the trading of key commodities, improving price discovery, and reducing transaction costs for producers and buyers alike. Ethiopia carries a substantial external debt burden, totaling approximately 28 billion US dollars. Of this amount, over 13 billion dollars is owed to China, reflecting the significant role of Chinese financing in Ethiopia’s infrastructure development and economic projects. Despite the sizable debt, Ethiopia’s debt-to-GDP ratio remains lower than that of many comparable and neighboring countries, suggesting a relatively manageable debt position in relation to the size of its economy. Nevertheless, the country’s foreign exchange reserves have experienced a decline, standing at about 2.4 billion US dollars, which poses challenges for maintaining currency stability and financing imports. The Ethiopian government has articulated an ambitious goal for the country to attain middle-income status by 2025. This objective underpins many of the ongoing economic reforms and development initiatives aimed at accelerating growth, improving infrastructure, and enhancing human capital. However, despite the notable economic expansion, poverty remains a significant issue. As of 2019, 68.7% of the population was affected by multidimensional poverty, which encompasses various deprivations beyond income, such as education, health, and living standards. An additional 18.4% of the population was considered vulnerable to multidimensional poverty, highlighting the persistent socio-economic challenges that accompany Ethiopia’s rapid economic transformation.

Ethiopia’s abundant natural resources have historically positioned the country as a nexus of long-standing interactions with external civilizations, a distinction that set it apart from much of sub-Saharan Africa. Unlike many neighboring regions that remained relatively isolated, Ethiopia maintained continuous contacts with the outside world through trade and cultural exchange. From ancient times, Ethiopian traders actively engaged in the exchange of valuable commodities such as gold, ivory, musk, and wild animal skins, which were traded in return for essential goods like salt as well as luxury items including silk and velvet. This vibrant trade network underscored Ethiopia’s integration into broader economic systems that spanned continents. By the late nineteenth century, coffee had emerged as one of Ethiopia’s most significant cash crops, capitalizing on the country’s favorable climatic and geographic conditions. Coffee cultivation not only contributed to the domestic economy but also laid the foundation for Ethiopia’s reputation as the birthplace of coffee, a status that would influence global coffee culture. During this period, trade routes were well established, with most commerce conducted along two principal corridors converging in the Kefa-Jima region in the southwest. One major route extended northward to Mitsiwa, passing through key cities such as Gonder and Adwa, while the other followed the Awash River valley eastward to Harer, before reaching the Red Sea ports of Berbera or Zeila. These routes facilitated the movement of goods and connected Ethiopia to the wider Indian Ocean and Red Sea trade networks. Ethiopia’s prominence as a great trading empire, however, diminished following the decline and eventual fall of the ancient kingdom of Axum. The fall of Axum marked a turning point, after which the Ethiopian societal ethos shifted away from mercantile pursuits. In the ensuing centuries, Ethiopians increasingly held traders in low esteem, favoring instead the cultural ideals embodied by legendary warriors and priests. This cultural shift contributed to a reduced emphasis on commerce as a central economic activity within the country. Despite this decline in indigenous trading prominence, foreign traders from Greek, Armenian, and Arab backgrounds established a significant presence within Ethiopia, becoming the primary economic intermediaries between the country and the external world. Arab traders, in particular, settled internally and came to dominate commercial activities, monopolizing all major trade except for petty local exchanges. Their influence entrenched a pattern whereby foreign merchant groups controlled much of Ethiopia’s external trade, shaping the economic landscape for centuries. The Italian occupation of Ethiopia, which ended in 1941, left the country’s economic structure largely intact, with few substantial changes from the centuries prior. Although the Italians made some improvements in communications infrastructure, established small industries, and promoted commercial farming—especially in Eritrea, which had been under Italian control since 1890—these developments were limited in scope. The broader Ethiopian economy remained predominantly based on barter, with only a small fraction of the population engaged in monetized economic activities. Trade volumes were negligible, wage labor opportunities were scarce, and markets for manufactured goods remained very small, reflecting the largely subsistence-oriented nature of the economy. In the late 1940s and throughout the 1950s, Ethiopia’s economic conditions remained largely unchanged. Government efforts during this period focused primarily on expanding the bureaucracy and ancillary services rather than on stimulating broad-based economic development. The majority of Ethiopian farmers continued to practice small-scale cultivation or cattle herding using traditional methods that supported subsistence living. Nomadic populations in arid regions raised livestock and moved seasonally in search of pasture, maintaining a pastoralist lifestyle that had persisted for centuries. While the agricultural sector experienced slight growth, the industrial sector remained minimal and underdeveloped. By the early 1950s, Emperor Haile Selassie I, who reigned from 1930 to 1974, began promoting a transition from a subsistence economy to an agro-industrial one. His policies emphasized the development of infrastructure, the efficient utilization of natural resources, and the improvement of living conditions through enhanced health, education, and communication services. Central to his economic vision was the adoption of centrally planned development programs aimed at modernizing Ethiopia’s economy and integrating its diverse regions. The First Five-Year Plan, implemented from 1957 to 1961, sought to develop critical infrastructure, including transportation networks, construction projects, and communication systems, with the goal of connecting the country’s isolated regions. Although the plan achieved an average annual gross national product (GNP) growth rate of 3.2%, this fell short of the projected 3.7%. Key sectors such as agriculture, manufacturing, and mining failed to meet their respective targets, highlighting the challenges of transforming Ethiopia’s largely traditional economy. The Second Five-Year Plan, covering the period from 1962 to 1967, launched a comprehensive 20-year program aimed at transforming Ethiopia into an agro-industrial economy. However, due to personnel shortages, the Planning Commission was unable to conduct a formal assessment of the plan’s performance, leaving its outcomes less clearly documented. The plan nonetheless represented a continued commitment to economic modernization and diversification. The Third Five-Year Plan, spanning 1968 to 1973, focused on enhancing manufacturing and agro-industrial sectors while also expanding educational opportunities and improving agricultural productivity among peasant farmers. This plan aimed to build on previous efforts to stimulate industrial growth and raise the standard of living across the country. Between the fiscal years 1960/61 and 1973/74, Ethiopia experienced sustained economic growth, with an average annual per capita GDP growth rate of 4.4% from 1960 to 1970. This period of growth was marked by gradual diversification of the economy, although performance relative to neighboring countries was mixed. By the early 1970s, Ethiopia’s economy had begun to diversify into manufacturing and service sectors; however, the vast majority of the population remained impoverished subsistence farmers. These farmers primarily produced enough to meet their own needs, with much of their output consumed in the payment of taxes, rents, debts, and bribes, limiting their ability to accumulate surplus wealth or invest in productivity-enhancing technologies. The 1974 revolution brought significant political upheaval and led to the nationalization and restructuring of Ethiopia’s economy. The revolutionary period from 1974 to 1978 was characterized by armed conflict and radical institutional reforms, which disrupted economic activity and resulted in minimal growth. During this time, the country’s gross domestic product (GDP) grew at an average annual rate of only 0.4%, reflecting the challenges posed by political instability and policy shifts. From 1978 to 1980, the Ethiopian economy began to recover as the government consolidated power and implemented reforms aimed at stabilizing and revitalizing economic activity. During this period, GDP growth averaged 5.7% annually, signaling a tentative return to growth. However, this recovery was short-lived; between 1980 and 1985, the economy experienced setbacks, with GDP growth declining except for a temporary rebound in 1982/83. Manufacturing contracted during this period, and the agricultural sector faced a severe crisis precipitated by drought and famine, which further undermined economic progress. From 1985 to 1990, the Ethiopian economy stagnated, with GDP growth averaging around 5% annually. The lingering effects of the 1984–85 drought continued to hamper overall economic development, exacerbating food insecurity and limiting the potential for sustained growth. Since 1991, Ethiopia has embarked on a series of economic reforms aimed at liberalizing the economy and attracting foreign investment. These reforms have included the privatization of state-owned enterprises and deregulation measures designed to create a more conducive environment for private sector development. As a result, Ethiopia has become an increasingly attractive destination for foreign direct investment. By 2015, Ethiopia had approximately 2,700 millionaires, a figure that more than doubled since 2007. The wealth of these individuals primarily derived from economic rents in sectors such as banking and mining rather than from investments in strategic or industrial sectors, indicating a concentration of wealth in certain areas of the economy. The Ethiopian government has actively promoted foreign investment, particularly in the textile industry, offering incentives such as duty-free importation of machinery, ten-year tax exemptions, low rent prices, and inexpensive water and electricity. These measures have attracted major international brands, including Decathlon, H&M, and Huajian, which have established operations in Ethiopia. These companies benefit from the availability of cheap labor, with monthly wages averaging around 35 euros. Trade agreements between Ethiopia and the European Union have further facilitated economic growth by enabling duty-free exports of Ethiopian products to European markets. This preferential access has provided Ethiopian producers with expanded opportunities to compete internationally and has contributed to the country’s ongoing economic transformation.

The coffee sorting process in Ethiopia is both extensive and significant, reflecting the country’s status as a major global exporter of coffee. Ethiopia exports coffee valued at over one billion U.S. dollars annually, making it a cornerstone of the nation’s export economy. The meticulous sorting and grading of coffee beans ensure that the product meets international quality standards, thereby maintaining Ethiopia’s reputation for producing some of the world’s finest Arabica coffee. This process involves multiple stages, including handpicking, washing, drying, and sorting by size and quality, which collectively contribute to the high market value of Ethiopian coffee on the global stage. In 1976, a detailed map illustrating the distribution of economic activities within Ethiopia and Eritrea was produced, providing a visual representation of the spatial organization of various economic sectors in these neighboring countries. This map highlighted the geographic dispersion of agriculture, industry, and other economic pursuits, offering valuable insights into regional economic strengths and resource allocations during that period. The map served as an important tool for understanding the economic landscape and planning developmental interventions in both countries. As of 2023, agriculture remains a central pillar of Ethiopia’s economy, accounting for approximately 36% of the country’s Gross Domestic Product (GDP). This significant contribution underscores the sector’s vital role in sustaining economic activity and livelihoods across the nation. Furthermore, agriculture dominates Ethiopia’s export profile, constituting about 81% of total exports, which emphasizes its critical importance in foreign trade and foreign exchange earnings. The sector also serves as the primary source of employment, engaging approximately 73% of the labor force, which reflects the predominance of agricultural activities in rural areas and the overall economy. The majority of agricultural production in Ethiopia is subsistence-based, with smallholder farmers cultivating crops primarily for their own consumption. Despite this, a considerable portion of exports originates from small-scale agricultural cash-crop farming, which includes commodities grown specifically for sale in domestic and international markets. This dual nature of agricultural production—subsistence alongside commercial cash cropping—illustrates the complex dynamics of Ethiopia’s agricultural sector, where traditional farming practices coexist with emerging market-oriented activities. Ethiopia produces a diverse array of principal crops that form the backbone of its agricultural output. These include coffee, pulses such as beans, oilseeds, cereals, potatoes, sugarcane, and various vegetables. Each of these crops plays a distinct role in both the domestic food supply and export earnings. Coffee, in particular, stands out as the largest foreign exchange earner, reinforcing its status as Ethiopia’s most valuable agricultural commodity. The cultivation of pulses and oilseeds also contributes significantly to export revenues, while staples like cereals and potatoes ensure food security for the population. The country’s flower industry has emerged as a notable new source of revenue, especially during the 2005/2006 period, which represents the latest available data on this sector. The floriculture industry experienced rapid growth during this time, positioning Ethiopia as an important player in the global cut flower market. Flowers such as roses and other ornamental plants were cultivated primarily for export, generating foreign exchange and creating employment opportunities, particularly for women in urban and peri-urban areas. In the 2005/2006 period, Ethiopia’s coffee exports accounted for 0.9% of the world’s total coffee exports, reflecting its modest but significant share in the global coffee market. During the same timeframe, oilseeds and flowers each represented approximately 0.5% of global exports, indicating the growing diversification of Ethiopia’s agricultural export base beyond coffee. These figures highlight Ethiopia’s emerging role as a supplier of various agricultural commodities on the international stage. Ethiopia holds the distinction of being the second-largest maize producer in Africa, underscoring the crop’s importance in the country’s agricultural landscape. Maize serves as a staple food for much of the population and is cultivated extensively across diverse agro-ecological zones. The prominence of maize production contributes to food security and supports livestock feed requirements, thereby sustaining both human and animal populations. Livestock has historically played a significant economic role in Ethiopia. In 2000, the livestock sector contributed approximately 19% to the nation’s total GDP, emphasizing its importance within the broader agricultural economy. Livestock farming encompasses the rearing of cattle, sheep, goats, camels, and poultry, providing meat, milk, hides, and other products essential for domestic consumption and export. The sector also supports rural livelihoods and serves as a form of wealth and social status among many Ethiopian communities. By 2008, concerns arose regarding large-scale land acquisitions by foreign countries, including Saudi Arabia, which had begun planning to purchase and develop extensive tracts of arable land in Ethiopia. These developments sparked significant apprehension about land grabbing and its potential implications for food security within Ethiopia. Critics feared that such land deals could lead to the export of food produced on Ethiopian soil to wealthier nations, potentially exacerbating local food shortages and undermining the livelihoods of smallholder farmers. Ethiopia’s forest products primarily consist of logs used in the construction industry, reflecting the importance of timber as a raw material for building and infrastructure development. Additionally, silvicultural products derived from forests serve multiple roles, including applications in manufacturing and as sources of energy, particularly through fuelwood and charcoal. The sustainable management of forest resources remains a critical challenge, given the pressures of deforestation and land degradation. The country’s fisheries sector is exclusively freshwater-based, as Ethiopia lacks access to marine coastlines. Fish production has shown a steady increase since 2007, although the fishing industry remains relatively small within the overall economy. Fishing activities are predominantly artisanal, characterized by small-scale, traditional methods rather than industrial operations. In 2014, nearly 45,000 fishermen were employed in the sector, with only about 30% working on a full-time basis, highlighting the seasonal and supplementary nature of fishing as a livelihood. In 2018, Ethiopia produced a wide range of key agricultural goods, reflecting the diversity and scale of its agricultural sector. The country harvested 7.3 million tons of maize, ranking 17th globally, and 4.9 million tons of sorghum, which placed Ethiopia 4th worldwide. Wheat production reached 4.2 million tons, while barley output stood at 2.1 million tons, ranking 17th globally. Sweet potato production was 1.8 million tons, earning Ethiopia the 5th position globally, and sugarcane production totaled 1.4 million tons. Yam production was 1.3 million tons, also ranking 5th globally. Other significant crops included broad beans (988 thousand tons), millet (982 thousand tons), potatoes (743 thousand tons), and vegetables (599 thousand tons). Additional agricultural outputs in 2018 encompassed 515 thousand tons of chickpeas, ranking Ethiopia 6th globally, and 508 thousand tons of bananas. Cabbage production reached 446 thousand tons, while peas totaled 374 thousand tons, placing Ethiopia 20th globally. Onion output was 322 thousand tons, and sesame seeds amounted to 301 thousand tons, ranking 7th worldwide. Bell pepper production was 294 thousand tons, lentils totaled 172 thousand tons, ranking 11th globally, and rice production was 144 thousand tons. Peanuts were produced at 143 thousand tons, cotton at 140 thousand tons, and garlic at 124 thousand tons. Mangoes, including mangosteen and guava, accounted for 102 thousand tons, while linseed production reached 101 thousand tons, ranking 7th globally. This extensive agricultural production profile demonstrates Ethiopia’s capacity to cultivate a broad spectrum of crops, many of which hold significant positions in global rankings. The diversity of crops supports both domestic food security and export earnings, contributing to the resilience and complexity of Ethiopia’s agricultural economy.

Employees working in Ethiopian garment factories that produce clothing for prominent international brands such as Guess, H&M, and Calvin Klein received monthly salaries averaging only 26 US dollars as of 2019. This wage level was markedly low compared to global industry standards, reflecting the broader economic challenges and labor market conditions within Ethiopia’s textile sector. The minimal remuneration was intended to keep production costs competitive in the global apparel market, yet it had significant implications for the workforce and the overall efficiency of the industry. Despite the presence of multinational brands, the compensation provided to Ethiopian garment workers remained insufficient to meet basic living expenses, contributing to widespread economic hardship among employees. The extremely low wages paid to these workers directly influenced productivity levels within the Ethiopian textile industry, which remained notably low relative to other garment-producing countries. Low compensation often correlated with diminished worker motivation and engagement, as employees struggled to maintain morale under financially constrained circumstances. This environment hindered the development of a highly skilled and stable labor force, which is essential for achieving consistent output and quality in garment manufacturing. Consequently, the industry faced challenges in scaling operations and meeting the demands of international buyers who expected timely delivery and adherence to quality standards. The inadequate wages and substandard working conditions prevalent in many Ethiopian garment factories also led to frequent labor unrest and strikes among factory employees. Workers organized protests and work stoppages to demand better pay, improved workplace safety, and enhanced labor rights protections. These strikes disrupted production schedules and strained relations between factory management and the workforce, further exacerbating the difficulties faced by the textile sector. The persistence of such labor disputes highlighted systemic issues related to labor standards enforcement and the need for regulatory reforms to protect workers’ rights in Ethiopia’s rapidly expanding garment industry. Another significant challenge confronting the Ethiopian textile industry was the high rate of employee turnover, which undermined efforts to build a stable and experienced workforce. Some factories reported replacing their entire staff approximately every 12 months, indicating a cycle of continuous attrition and recruitment. This high turnover rate imposed additional costs on factory operators due to the need for ongoing training and orientation of new employees, while also disrupting production continuity. Factors contributing to this turnover included low wages, poor working conditions, limited opportunities for career advancement, and the physical demands of garment factory work. The instability in the labor force impeded the development of institutional knowledge and skill accumulation, which are critical for enhancing productivity and competitiveness. These observations and findings were detailed in a 2019 report published by the Stern Centre for Business and Human Rights at New York University. The report provided an in-depth analysis of labor practices within Ethiopia’s garment sector, drawing attention to the human rights implications of the industry’s labor model. It underscored the tension between Ethiopia’s ambitions to become a major player in global textile manufacturing and the realities faced by workers on the ground. By documenting wage levels, labor unrest, and turnover rates, the report contributed to a broader understanding of the challenges that must be addressed to foster sustainable and equitable growth in Ethiopia’s textile industry.

Mining has emerged as a significant sector within Ethiopia’s economy, representing an important avenue for diversification away from the historically dominant agricultural industry. While agriculture has traditionally been the backbone of the Ethiopian economy, the mining sector offers potential for broadening the economic base and fostering export-oriented growth. Despite its potential, the mining sector currently contributes approximately 1% to Ethiopia’s Gross Domestic Product (GDP), reflecting a relatively modest share compared to other economic activities. Nonetheless, the government and various stakeholders have recognized the strategic importance of minerals in driving economic development and increasing foreign exchange earnings. Ethiopia’s mineral wealth includes a variety of commodities that align with its export-oriented growth strategy, with gold, gemstones, and industrial minerals playing pivotal roles. Gold remains the most prominent mineral commodity, serving as a cornerstone for export revenue and investment attraction. Alongside gold, gemstones such as diamonds and sapphires have been identified as valuable resources with significant market potential. Industrial minerals, which include materials used in manufacturing and construction, also contribute to the sector’s diversity and economic relevance. The government has actively promoted these mineral commodities to enhance the country’s export profile and reduce reliance on traditional agricultural exports. The country possesses deposits of a wide range of minerals, including coal, opal, gemstones, kaolin, iron ore, soda ash, and tantalum, reflecting a rich and varied geological endowment. However, despite this mineral diversity, gold remains the only mineral extracted in substantial quantities on a commercial scale. Coal deposits have been identified but are not yet fully exploited, while opal and kaolin deposits are known but remain underdeveloped. Iron ore and soda ash also exist in measurable quantities, with soda ash being particularly important for industrial applications. Tantalum, a rare metal used in electronics, has attracted interest due to its profitability, although its production levels have not reached the scale of gold mining. Salt extraction in Ethiopia occurs primarily in the Afar Depression, an extensive lowland area characterized by salt beds, as well as from salt springs located in the Dire and Afder districts in the southern part of the country. This salt production is largely intended for domestic consumption, serving local markets and traditional uses rather than international trade. Consequently, salt exports from Ethiopia are negligible, reflecting the limited scale and primarily subsistence nature of this activity. The salt harvested from these regions has historically played an important role in local economies and cultural practices, even though it has not contributed significantly to national export revenues. Tantalum mining has proven to be a profitable venture in Ethiopia, particularly given the global demand for this mineral in the electronics industry. The extraction and export of tantalum have provided valuable foreign exchange earnings and contributed to the diversification of the mining sector. However, during the late 1980s, Ethiopia’s mineral industry was relatively insignificant in the broader economic context, contributing less than 0.2% to the national GDP. At that time, the sector was underdeveloped, with limited infrastructure, investment, and technological capacity to exploit the country’s mineral resources fully. The subsequent decades have seen gradual improvements in mining activities and increased recognition of the sector’s potential. Gold mining, in particular, has been identified as a key development sector for Ethiopia, with the government and private enterprises investing in exploration, extraction, and processing activities. The sector has experienced significant growth in gold exports over the years, reflecting both increased production and improved market access. Gold mining operations have expanded beyond artisanal and small-scale activities to include larger commercial ventures, which have contributed to the rise in export volumes and values. This growth has positioned gold as a critical component of Ethiopia’s strategy to generate foreign currency and stimulate economic development. The increase in gold exports has been dramatic, rising from a modest US$5 million in 2001 to an impressive US$602 million in 2012. This exponential growth underscores the sector’s transformation and the effectiveness of policies aimed at promoting mineral exports. The surge in gold export revenues has had a positive impact on the country’s balance of payments and has attracted foreign direct investment into the mining sector. The expansion of gold exports also reflects improvements in mining technology, regulatory frameworks, and market linkages that have enabled Ethiopia to capitalize on its mineral endowment more effectively. In terms of production volumes, gold output in 2001 was approximately 3.4 tons, marking a baseline for subsequent increases in extraction levels. Over the years, production has expanded in response to rising global gold prices, enhanced exploration activities, and increased investment in mining infrastructure. The growth in gold production has been supported by both artisanal miners and larger-scale mining companies, with the latter playing a more prominent role in recent years. This increase in production capacity has been instrumental in driving the substantial rise in export earnings from gold, solidifying its status as a cornerstone of Ethiopia’s mineral economy.

Waterpower and forests have historically constituted the primary sources of energy in Ethiopia, with hydropower playing a particularly dominant role in the country’s electricity generation. Approximately 90 percent of Ethiopia’s electricity needs are met through hydropower, underscoring the nation’s reliance on its abundant water resources to fuel its energy sector. This dependence on hydropower is closely linked to the country’s climatic conditions, as Ethiopia’s electricity generation is heavily influenced by the availability of rainfall. Much like its agricultural sector, which depends on seasonal rains, the performance of hydropower plants fluctuates in response to variations in precipitation, making the energy supply vulnerable to climatic variability and drought conditions. As of recent assessments, Ethiopia’s installed electricity capacity stands at about 2,000 megawatts. However, the government has articulated ambitious plans to expand this capacity significantly, aiming to reach a total installed capacity of 10,000 megawatts. This expansion is part of a broader strategy to enhance energy security, support industrialization, and improve access to electricity across the country. The emphasis on hydropower development is complemented by investments in other renewable energy sources, but water remains the cornerstone of Ethiopia’s energy infrastructure due to its vast river systems and highland topography. In addition to hydropower, Ethiopian households and industries have long relied on forests to meet their energy and construction needs. The widespread use of wood fuel and charcoal for cooking and heating, coupled with timber extraction for building materials, has exerted substantial pressure on the country’s forest resources. Over the past three decades, this dependence has led to significant deforestation, particularly in the highland regions where population density is high and demand for fuelwood is intense. The loss of forest cover has had profound environmental consequences, including soil erosion, reduced biodiversity, and altered hydrological cycles, which in turn affect agricultural productivity and water availability. Recognizing the critical role of energy in economic development, Ethiopia has outlined an ambitious investment plan targeting the energy sector. The government intends to invest a total of $40 billion in 71 energy projects by the year 2030, encompassing a diverse portfolio that includes hydropower, wind, solar, geothermal, and transmission infrastructure. This substantial financial commitment reflects Ethiopia’s determination to transform its energy landscape, increase electricity access, and position itself as a regional energy hub. The projects are expected to not only boost domestic energy supply but also facilitate electricity exports to neighboring countries, thereby generating foreign exchange and fostering regional integration. Despite these efforts, less than 50 percent of Ethiopian towns and cities are currently connected to the national electricity grid. This limited grid coverage highlights the challenges of extending reliable electricity access in a country characterized by rugged terrain, dispersed rural populations, and infrastructural constraints. The government has prioritized rural electrification and off-grid solutions to bridge this gap, but progress remains uneven, and many communities continue to rely on traditional biomass and other non-electrical energy sources for their daily needs. Ethiopia’s petroleum requirements are primarily satisfied through imports of refined products, as the country lacks significant domestic refining capacity. Some of the oil consumed is transported overland from Sudan, which serves as a key supplier in the region. The reliance on imported petroleum products exposes Ethiopia to global oil price volatility and supply chain risks, underscoring the importance of developing indigenous hydrocarbon resources to enhance energy security and reduce import dependence. Oil exploration in Ethiopia has a long history, dating back to the mid-20th century. The initial phase of exploration began under the reign of Emperor Haile Selassie I, who in September 1945 granted a 50-year concession to SOCONY-Vacuum, an American oil company, to conduct prospecting activities. This early engagement marked the beginning of Ethiopia’s efforts to identify and develop its hydrocarbon potential, although commercial production has yet to be realized on a significant scale. Over the decades, exploration has continued intermittently, with varying degrees of success and investment. The discovery of substantial oil and gas reserves across East Africa in recent years has elevated the region’s profile in the global oil and gas industry. Countries such as Uganda, Kenya, Tanzania, and Mozambique have unveiled large hydrocarbon deposits, attracting international attention and investment. This regional momentum has had a spillover effect on Ethiopia, which shares geological basins with some of these neighbors and has intensified its exploration activities to capitalize on the emerging opportunities. Despite the optimism surrounding East Africa’s hydrocarbon potential, the industry faces significant challenges. The global decline in oil prices, coupled with expectations of an L-shaped economic recovery characterized by prolonged low demand and sustained price weakness, has cast uncertainty over the economic viability of many projects in the region. These market conditions have led to reassessments of investment plans, delays in project development, and increased scrutiny of cost structures, affecting the pace at which new oil and gas fields can be brought into production. Ethiopia’s own oil and gas reserves are estimated at approximately 4 trillion cubic feet, equivalent to around 110 billion cubic meters. This sizable resource base positions the country as a potentially important player in the East African hydrocarbon landscape. Exploration activities are currently focused in the Gambela Region, which borders South Sudan and is geologically promising due to its proximity to known oil-producing areas. The ongoing exploration efforts aim to delineate reserves, assess commercial prospects, and attract investment to develop the sector. The recent hydrocarbon discoveries in Ethiopia are anticipated to draw billions of dollars in annual investment over the next decade. Such capital inflows would not only stimulate the energy sector but also generate employment, enhance infrastructure, and contribute to broader economic growth. The government’s commitment to fostering a conducive environment for exploration and production is reflected in regulatory reforms, incentives, and partnerships with international oil companies. According to estimates by Business Monitor International (BMI), Ethiopia’s recent oil and gas findings surpass those of any other region globally, underscoring the country’s emerging significance in the energy domain. Exploration activities are expected to continue for several more years, as geological surveys and drilling campaigns seek to fully characterize the resource base and unlock commercial potential. This sustained exploration phase is critical to transitioning from discovery to production and realizing the economic benefits of the sector. However, the falling global oil prices pose a substantial threat to the commercial viability of many of Ethiopia’s gas prospects and regional oil projects. Lower prices reduce profit margins and can render marginal fields uneconomical, leading to project postponements or cancellations. This economic reality necessitates careful project selection, cost optimization, and strategic planning to ensure that development efforts remain feasible in a challenging market environment. The interplay of geological potential, market dynamics, and policy frameworks will ultimately determine the trajectory of Ethiopia’s oil and gas industry in the coming years.

Since the late 1990s, Ethiopia embarked on a comprehensive program to privatize state-owned enterprises within its manufacturing sector, marking a significant shift in the country’s economic policy. This initiative was part of a broader structural adjustment and economic liberalization effort aimed at increasing efficiency, attracting foreign investment, and stimulating private sector participation. Prior to this period, much of Ethiopia’s manufacturing base was dominated by government-owned companies, which often suffered from inefficiencies, limited capital, and outdated technology. The privatization program sought to transfer ownership and management responsibilities from the public sector to private entities, both domestic and international, thereby fostering a more competitive and dynamic industrial environment. This process involved the sale or lease of various manufacturing enterprises, including those in textiles, food processing, and chemicals, and was supported by legal and regulatory reforms to create a more conducive business climate. The manufacturing industry in Ethiopia has experienced significant growth over recent years, emerging as one of the fastest-growing sectors in the country’s economy. This expansion has been driven by a combination of factors, including government policy support, increased investment, and improvements in infrastructure. Manufacturing’s contribution to Ethiopia’s gross domestic product (GDP) has steadily increased, reflecting the sector’s rising importance in diversifying the economy beyond its traditional agricultural base. Key sub-sectors such as textiles and garments, leather products, food and beverages, and construction materials have witnessed notable development. The growth trajectory has also been bolstered by Ethiopia’s strategic location in the Horn of Africa, which facilitates access to regional and international markets. Additionally, the government’s emphasis on industrialization as a pathway to economic transformation has led to targeted efforts to enhance manufacturing capacity and competitiveness. As part of its industrial development strategy, Ethiopia has established several industrial parks designed to serve as hubs for manufacturing and export-oriented production. These industrial parks represent a deliberate effort by the government to create dedicated zones that offer infrastructure, utilities, and services tailored to the needs of manufacturing firms. By concentrating industrial activity within these parks, Ethiopia aims to achieve economies of scale, improve logistics, and foster clusters of specialized industries. The parks are typically equipped with reliable electricity, water supply, transportation links, and customs facilitation, which collectively reduce operational costs and enhance productivity for tenant companies. This approach also supports the government’s broader objectives of job creation, technology transfer, and export promotion. The establishment of these parks aligns with Ethiopia’s Growth and Transformation Plans, which prioritize industrialization as a key driver of sustainable economic development. Among the various sectors targeted within these industrial parks, the textiles sector has received particular emphasis, reflecting a strategic focus on developing Ethiopia’s textile manufacturing capabilities. This targeted effort is based on the recognition of textiles and garments as labor-intensive industries with significant potential for employment generation, export earnings, and value addition. The industrial parks dedicated to textiles provide specialized facilities and services that cater to the unique requirements of textile production, including access to raw materials, skilled labor, and quality control mechanisms. By fostering a conducive environment for textile manufacturing, Ethiopia aims to position itself as a competitive player in the global textile and apparel market. This focus has attracted both domestic entrepreneurs and foreign investors, particularly from countries with established textile industries seeking to diversify production bases. The development of the textiles sector within these industrial parks is also supported by government incentives such as tax breaks, streamlined customs procedures, and investment promotion initiatives, all designed to enhance the sector’s growth and integration into global value chains.

Prior to the outbreak of the Eritrean–Ethiopian War between 1998 and 2000, Ethiopia, a landlocked country, primarily depended on the seaports of Asseb and Massawa, both located in Eritrea, for its international trade activities. These ports served as critical gateways for the import and export of goods, facilitating the majority of Ethiopia’s foreign trade due to the country’s lack of direct access to the sea. The reliance on Asseb and Massawa was a longstanding arrangement, rooted in Ethiopia’s historical connection with Eritrea before Eritrea’s independence in 1993. However, the eruption of hostilities between the two nations disrupted this arrangement, effectively severing Ethiopia’s access to these ports and prompting the need for alternative maritime trade routes. Following the loss of access to Eritrean ports, Ethiopia increasingly turned to the port of Djibouti as its primary maritime outlet. By 2005, the port of Djibouti had become the main conduit for Ethiopia’s international trade. This shift was facilitated by the Addis Ababa – Djibouti Railway, a vital rail link that connected Ethiopia’s capital city directly to the port, enabling efficient movement of both freight and passengers. The railway played a crucial role in mitigating the logistical challenges posed by Ethiopia’s landlocked status, providing a reliable and relatively rapid transportation corridor that supported the country’s growing trade volumes. The port of Djibouti, strategically located on the Gulf of Aden, thus emerged as a critical asset in Ethiopia’s economic infrastructure, handling the vast majority of the country’s maritime trade. In addition to its primary reliance on the port of Djibouti, Ethiopia also utilized the port of Port Sudan in Sudan to a lesser extent for its maritime trade needs. Although this port was not as heavily trafficked by Ethiopian trade as Djibouti, it nonetheless provided an alternative route for imports and exports, particularly for certain commodities and trade partners. The use of Port Sudan reflected Ethiopia’s efforts to diversify its access to seaports in the face of geopolitical challenges and logistical constraints. However, the relative distance and less developed transportation infrastructure linking Ethiopia to Port Sudan limited its capacity to serve as a major trade hub compared to Djibouti. In May 2005, seeking to further diversify and enhance its port access options, the Ethiopian government initiated negotiations aimed at gaining access to the port of Berbera in Somaliland. This strategic move was part of Ethiopia’s broader efforts to reduce its dependence on any single port and to secure more resilient and flexible trade routes. Berbera, located on the southern coast of the Gulf of Aden, offered a geographically advantageous location with the potential to serve as an alternative maritime outlet. The negotiations reflected Ethiopia’s proactive approach to addressing its landlocked status by exploring partnerships with neighboring regions and countries that could facilitate improved access to international shipping lanes. Looking ahead, the Ethiopian government articulated ambitious plans for the development of the country’s transportation infrastructure, setting a target to invest approximately $74 billion by the year 2030. This substantial investment commitment underscored the government’s recognition of transportation as a critical driver of economic growth and regional integration. The planned expenditures encompassed a wide range of infrastructure projects, including the expansion and modernization of road networks, railways, airports, and port facilities. By prioritizing transportation development, Ethiopia aimed to enhance connectivity both within the country and with neighboring states, thereby improving trade efficiency, reducing logistics costs, and supporting broader economic transformation goals. This long-term vision reflected Ethiopia’s strategic emphasis on building a robust and diversified transport sector capable of sustaining its development trajectory in the decades to come.

As of 2016, Ethiopia possessed an extensive network of all-weather roads totaling 113,066 kilometers (70,256 miles), reflecting significant growth in the country’s transportation infrastructure. This expansive road system was designed to facilitate year-round connectivity across diverse climatic regions, thereby enhancing trade, mobility, and access to essential services. The all-weather designation indicates that these roads were constructed or maintained to remain passable throughout the year, including during the rainy seasons when unpaved routes often become impassable. This development was part of Ethiopia’s broader efforts to improve rural and urban accessibility, promote economic integration, and support agricultural and industrial activities by linking production centers with markets and ports. The considerable length of the road network underscored the government’s commitment to infrastructure expansion as a foundation for sustainable economic growth and regional development. Moreover, the road system’s scale positioned Ethiopia as having one of the largest road networks in sub-Saharan Africa, which played a crucial role in facilitating domestic commerce and international trade corridors. The emphasis on all-weather roads also contributed to reducing transportation costs and travel times, thereby improving the overall efficiency of the national economy.

Ethiopian Airlines holds the distinction of being Africa’s largest airline both in terms of fleet size and profitability, a status that reflects its significant role in the continent’s aviation industry. Founded in 1945, the airline has grown steadily over the decades, evolving into a major player on the global stage. Its success is attributed to strategic management, investment in modern aircraft, and a commitment to expanding its route network, which has allowed it to capture a substantial share of passenger and cargo traffic within Africa and beyond. The airline’s profitability has consistently outpaced many of its regional competitors, underscoring its operational efficiency and strong market presence. The airline operates an extensive route network that spans 132 destinations worldwide, connecting Africa with Europe, Asia, the Americas, and the Middle East. This expansive network facilitates not only passenger travel but also cargo transport, making Ethiopian Airlines a critical link in global supply chains. The airline’s hub at Addis Ababa Bole International Airport serves as a strategic transit point, enabling seamless connections between continents. This global reach supports Ethiopia’s broader economic ambitions by fostering trade, tourism, and international business relations. The airline’s ability to serve such a diverse array of destinations demonstrates its operational capacity and its importance as a continental gateway. Ethiopian Airlines maintains a fleet comprising 141 aircraft, reflecting its commitment to modernity and efficiency in air travel. The fleet includes a mix of wide-body and narrow-body aircraft, which are suited to different route demands ranging from short-haul regional flights to long-haul intercontinental services. The airline has invested heavily in newer, fuel-efficient models such as the Boeing 787 Dreamliner and the Airbus A350, which contribute to reduced operating costs and enhanced passenger comfort. The size and composition of the fleet enable Ethiopian Airlines to maintain a high frequency of flights and adapt to fluctuating market demands. This substantial fleet size also supports the airline’s cargo operations, which have become increasingly important as global e-commerce and freight transport have expanded. Through its growth in fleet size, route network, and profitability, Ethiopian Airlines has established itself as a flagship carrier not only for Ethiopia but for the African continent as a whole. Its strategic positioning and operational capabilities have enabled it to compete effectively with international carriers, while also promoting regional integration and economic development. The airline’s continued expansion and modernization efforts reflect its ambition to remain at the forefront of African aviation and to serve as a vital conduit for global connectivity.

The Ethiopian railway network has undergone significant and rapid expansion in recent years, reflecting the country’s broader efforts to modernize its transportation infrastructure and stimulate economic growth. Historically limited by outdated and sparse rail lines, Ethiopia’s rail system has transformed into a more extensive and technologically advanced network, designed to facilitate both domestic mobility and international trade. This expansion aligns with Ethiopia’s strategic vision to become a regional logistics hub, leveraging rail connectivity to overcome challenges posed by its landlocked status and to integrate more fully with neighboring countries and global markets. A landmark milestone in Ethiopia’s rail development occurred in 2015 when Addis Ababa inaugurated Africa’s first light rail system. This pioneering urban transit project marked a significant advancement not only for Ethiopia but for the entire continent, introducing a modern, efficient, and environmentally friendly mode of transportation within the capital city. The Addis Ababa Light Rail, consisting of two lines that intersect in the city center, was designed to alleviate chronic traffic congestion and provide affordable, reliable transit for the city’s rapidly growing population. The system’s electrification and modern rolling stock represented a departure from traditional bus and minibus services, setting a new standard for urban public transportation infrastructure in Africa. Building on the momentum generated by the light rail project, Ethiopia further expanded its rail capabilities with the launch of the Addis Ababa-Djibouti electric railway in 2017. This railway established a critical international corridor linking Ethiopia’s capital to the port of Djibouti, which serves as the primary maritime outlet for Ethiopia’s imports and exports. The electrified railway replaced the older, narrow-gauge line, offering faster, more reliable, and higher-capacity freight and passenger services. By enhancing the efficiency of goods movement between Ethiopia and the Red Sea, the Addis Ababa-Djibouti railway has played a vital role in reducing transport costs, shortening transit times, and boosting economic integration between the two countries. The project was also emblematic of Ethiopia’s commitment to adopting modern rail technologies and infrastructure to support its industrialization and export ambitions. Currently, Ethiopia is undertaking further expansion of its electric railway network through two major projects: the Awash-Woldiya railway and the Woldiya-Mekelle railway. These lines are strategically planned to extend rail connectivity into the northern regions of the country, thereby promoting regional development and strengthening economic linkages within Ethiopia. The Awash-Woldiya railway is designed to connect the town of Awash, located on the existing Addis Ababa-Djibouti corridor, to Woldiya, a key commercial and administrative center in the Amhara region. This connection will facilitate the movement of agricultural products, manufactured goods, and passengers, contributing to the diversification of economic activities in northern Ethiopia. Similarly, the Woldiya-Mekelle railway aims to link Woldiya with Mekelle, the capital of the Tigray region, further integrating the northern territories into the national rail network. Both projects are expected to enhance regional connectivity, reduce transportation bottlenecks, and promote economic integration by linking previously isolated areas to major urban centers and international trade routes. The use of electric traction in these new lines underscores Ethiopia’s ongoing commitment to sustainable and modern railway infrastructure development. Together, these developments illustrate Ethiopia’s strategic focus on expanding and modernizing its railway network as a cornerstone of its economic development agenda. By investing in advanced rail technologies, electrified lines, and urban transit solutions, Ethiopia aims to improve domestic mobility, facilitate international trade, and support regional economic integration. The rapid expansion of the railway system is poised to have lasting impacts on the country’s economic landscape, fostering greater connectivity, reducing transportation costs, and enhancing the overall efficiency of both passenger and freight transport across Ethiopia and its neighboring countries.

Telecommunications in Ethiopia were historically dominated by a state-owned monopoly, Ethio Telecom, which was formerly known as the Ethiopian Telecommunications Corporation. Established as the sole provider of telecommunication services across the country, this government entity controlled all aspects of the sector, including fixed-line telephony, mobile services, and internet connectivity. For decades, Ethio Telecom held exclusive rights to operate and expand telecommunications infrastructure, which limited competition and innovation within the industry. The monopoly status was maintained as part of the government’s broader approach to managing strategic sectors, reflecting concerns over national security, economic control, and the need to coordinate infrastructure development in a country with challenging geography and a rapidly growing population. This longstanding state monopoly experienced a transformative change in October 2022, when Safaricom Telecommunications Ethiopia officially launched its telecommunications services. This event marked the historic entry of the first private operator into Ethiopia’s telecommunications sector, breaking the decades-old monopoly held by Ethio Telecom. Safaricom Telecommunications Ethiopia is a subsidiary of Safaricom, a major telecommunications company based in Kenya, known for its innovative mobile money platform M-Pesa and extensive mobile network coverage. The company’s launch introduced competition into the Ethiopian market, promising improved service quality, expanded coverage, and enhanced technological innovation. The entry of Safaricom was facilitated by a government-led liberalization process aimed at opening the telecommunications sector to private investment and foreign participation, a move that was widely seen as critical to modernizing Ethiopia’s digital infrastructure and boosting economic growth. The introduction of Safaricom Telecommunications Ethiopia represented a significant shift from the previously sole state-controlled telecommunications industry, signaling a new era of market liberalization and sector reform. This development was part of broader economic reforms initiated by the Ethiopian government to attract foreign direct investment and foster a more competitive business environment. By allowing private operators like Safaricom to enter the market, Ethiopia sought to address longstanding challenges such as limited network coverage, low internet penetration, and high service costs. The presence of a private competitor was expected to drive technological advancements, enhance customer service, and stimulate the rollout of next-generation telecommunications technologies, including 4G and eventually 5G networks. Moreover, this shift aligned with regional trends in East Africa, where countries like Kenya and Uganda had already embraced liberalized telecommunications markets, resulting in increased connectivity and digital innovation. Ethiopia’s reliance on Djibouti for maritime logistics and trade routes is underscored by the frequent docking of Ethiopian cargo ships at the port of Djibouti. As a landlocked country, Ethiopia depends heavily on access to seaports in neighboring countries to facilitate its international trade and import-export activities. The Port of Djibouti serves as the primary maritime gateway for Ethiopia, handling the majority of its containerized cargo and bulk shipments. This strategic partnership is crucial for Ethiopia’s economy, enabling the transportation of goods ranging from manufactured products to agricultural exports and essential imports such as fuel and machinery. The close logistical relationship with Djibouti also influences Ethiopia’s economic planning and infrastructure development, with investments made to improve road and rail links connecting Addis Ababa and other major Ethiopian cities to the port. The importance of this corridor is reflected in regional cooperation agreements and joint infrastructure projects aimed at enhancing trade efficiency and reducing transit times. In 2020, Ethiopian government ministers articulated a comprehensive national transformation strategy known as Digital Ethiopia 2025. This ambitious plan was designed to harness the potential of digital technologies to accelerate the country’s socio-economic development and position Ethiopia as a regional leader in the digital economy. Digital Ethiopia 2025 outlined a multi-faceted approach to expanding digital infrastructure, improving digital literacy, and fostering innovation ecosystems across various sectors including education, health, agriculture, and finance. The strategy emphasized the need to build a resilient and inclusive digital economy capable of generating employment, enhancing public service delivery, and improving overall competitiveness. It also recognized the critical role of telecommunications infrastructure as the backbone for digital transformation, highlighting the importance of expanding broadband access, promoting mobile connectivity, and supporting the growth of digital startups and enterprises. The primary goal of Digital Ethiopia 2025 was to prepare the country for the development of an economy increasingly based on digital technology, reflecting global trends toward digitization and technological integration. By 2025, the government aimed to achieve widespread digital inclusion, ensuring that citizens across urban and rural areas could access affordable and reliable internet services. This objective was linked to broader economic goals, including diversifying the economy beyond traditional agriculture and manufacturing sectors, fostering innovation-driven growth, and enhancing Ethiopia’s participation in global digital value chains. The strategy also sought to create an enabling regulatory environment that would encourage investment in digital infrastructure and services while safeguarding data privacy and cybersecurity. Through Digital Ethiopia 2025, the government envisioned a future where digital technologies would underpin critical sectors, facilitate e-government services, and empower citizens with new opportunities for education, entrepreneurship, and social engagement.

The services sector in Ethiopia has long been dominated by tourism, which constitutes a significant portion of the country’s economic activities within this category. Alongside tourism, other important components of the services sector include wholesale and retail trade, transportation, and communications, each contributing to the overall economic framework. Tourism, in particular, has played a pivotal role in shaping the service economy due to Ethiopia’s rich historical heritage, diverse cultural assets, and unique natural landscapes, which have attracted visitors from various parts of the world. The development of these ancillary services, such as transportation and communications, has often been closely tied to the growth and demands of the tourism industry, underscoring the interconnected nature of the service sector in Ethiopia. Tourism development in Ethiopia began to take shape during the 1960s, a period marked by increased international interest in the country’s ancient historical sites, including the rock-hewn churches of Lalibela and the ruins of Aksum, as well as its distinctive cultural traditions. This era saw the establishment of foundational tourism infrastructure and the promotion of Ethiopia as a travel destination. However, the momentum gained during this period was severely disrupted in the late 1970s and throughout the 1980s due to the political and social upheavals under the military government, known as the Derg regime. The regime’s policies, coupled with internal conflicts and economic challenges, led to a sharp decline in tourist arrivals and a stagnation of the industry. The instability during this decade not only deterred international tourists but also hindered investment in tourism facilities and services, resulting in a considerable setback for the sector. The 1990s marked the beginning of a gradual recovery for Ethiopia’s tourism industry, as the country transitioned to a more stable political environment and sought to rebuild its economic sectors. Despite this positive shift, the growth of tourism during this decade remained constrained by several critical factors. One of the primary limitations was the insufficient availability of suitable hotels and modern infrastructure, which impeded the ability to accommodate and attract a larger number of international visitors. Additionally, recurring droughts during this period adversely affected the country’s overall economic stability and diverted resources away from tourism development. The outbreak of the border war with Eritrea from 1998 to 2000 further compounded these difficulties by creating regional insecurity and discouraging travel to Ethiopia. Moreover, concerns over terrorism and regional instability in the broader Horn of Africa region contributed to a cautious approach by potential tourists and investors alike, slowing the pace of tourism expansion. In 2002, Ethiopia recorded a total of over 156,000 tourists visiting the country, marking a notable step in the recovery process. A significant portion of these tourists were Ethiopians residing abroad who returned to visit family and explore their homeland, reflecting the importance of the Ethiopian diaspora in supporting the tourism sector. The total expenditure by tourists in that year exceeded US$77 million, indicating the growing economic impact of tourism despite the aforementioned challenges. This influx of visitors and associated spending played a role in encouraging further development of tourism-related services and infrastructure, although the sector still faced considerable hurdles in achieving sustained growth. By 2008, the number of tourists entering Ethiopia had increased to approximately 330,000, more than doubling the figures recorded just six years earlier. This growth was driven by a combination of factors, including improved political stability, increased international awareness of Ethiopia’s cultural and natural attractions, and targeted efforts by the government and private sector to enhance tourism facilities and marketing. The expansion of air transport services and the gradual improvement of hotel accommodations contributed to making Ethiopia a more accessible and appealing destination for international travelers. Despite these advances, the tourism industry continued to grapple with infrastructural limitations and competition from other regional destinations, which moderated the pace of growth. The year 2019 represented a peak in Ethiopia’s tourism sector, with the country welcoming 812,000 tourists, a record high that underscored the significant strides made over the preceding decades. This surge in visitor numbers translated into tourism revenue of approximately $3.55 billion, reflecting the sector’s increasing contribution to the national economy. Tourism revenue accounted for 4.2 percent of Ethiopia’s gross national product (GNP) in 2019, highlighting the sector’s role as a vital component of economic development and diversification. The growth in tourism during this period was supported by enhanced infrastructure, including the expansion of the capital’s international airport, improvements in road networks, and the development of new hotels and lodges. Additionally, Ethiopia’s rich cultural festivals, historical sites, and natural attractions continued to draw a diverse array of tourists, ranging from cultural enthusiasts to eco-tourists and adventure travelers. The government’s strategic initiatives to promote tourism, coupled with increasing global interest in Africa as a travel destination, contributed to this upward trajectory, positioning tourism as a key driver of economic growth and employment in Ethiopia.

Ethiopia’s share of global gross domestic product (GDP) measured by Purchasing Power Parity (PPP) has exhibited a pattern of gradual change over the past several decades, reflecting shifts in the country’s relative economic size on the world stage. In 1980, Ethiopia accounted for approximately 0.08% of the global GDP based on PPP, a figure that slightly decreased to 0.07% in both 1990 and 2000. This slight decline was followed by a modest recovery, as the share increased to 0.10% by 2010 and further rose to 0.16% in 2017. These changes indicate a slow but steady expansion of Ethiopia’s economy relative to the global economy, underscoring the country’s gradual integration into the international economic system and its increasing economic output. According to estimates provided by the International Monetary Fund (IMF), Ethiopia’s GDP at market prices, measured in millions of Ethiopian Birr, demonstrated a consistent upward trajectory from 1980 through 2023. In 1980, the GDP stood at 14,665 million Birr, and by 2023, it had surged to 8,499,779 million Birr. This dramatic increase over four decades reflects both nominal growth and the expansion of economic activities across various sectors. The steady rise in GDP highlights the country’s efforts toward economic development, structural reforms, and increased productivity, despite challenges such as political instability and external shocks. In 1980, Ethiopia’s GDP was recorded at 14,665 million Birr, which translated to a per capita income of approximately 190 USD, based on an exchange rate of 2.06 Birr per US dollar. By 1990, the GDP had increased to 25,011 million Birr, with the per capita income rising to 257 USD, maintaining the same exchange rate of 2.06 Birr per USD. This decade saw moderate economic growth, with improvements in per capita income signaling some progress in living standards. The stable exchange rate during this period facilitated consistent valuation of Ethiopia’s currency relative to the US dollar, allowing for clearer comparisons of economic performance over time. Between 1995 and 2000, Ethiopia experienced notable changes in both its GDP and currency valuation. The GDP grew from 47,560 million Birr in 1995, with a per capita income of 148 USD, to 64,398 million Birr in 2000, although the per capita income decreased to 124 USD. This paradoxical decline in per capita income despite GDP growth was largely attributable to currency devaluation, as the exchange rate shifted from 5.88 Birr per USD in 1995 to 8.15 Birr per USD in 2000. The devaluation reflected economic challenges, including inflationary pressures and balance of payments difficulties, which affected the real purchasing power of the Ethiopian Birr and consequently the measured per capita income in US dollars. From 2000 onwards, Ethiopia embarked on a period of substantial economic growth, marked by significant increases in GDP and per capita income. In 2000, the GDP was 64,398 million Birr with a per capita income of 124 USD. By 2007, GDP had nearly tripled to 171,834 million Birr, and per capita income doubled to 253 USD. This upward trend continued into 2008, when GDP reached 245,973 million Birr, with per capita income rising to 333 USD. During this period, the exchange rate also depreciated, moving to 9.67 Birr per USD by 2008. The rapid growth was driven by structural reforms, investments in infrastructure, and expansion in sectors such as agriculture, manufacturing, and services, which collectively contributed to the improved economic indicators. In 2009, Ethiopia’s GDP further increased to 386,215 million Birr, accompanied by a per capita income of 398 USD and an exchange rate of 12.39 Birr per USD. The following year, GDP reached 427,026 million Birr; however, per capita income experienced a slight decline to 361 USD, while the exchange rate depreciated further to 13.33 Birr per USD. The decrease in per capita income despite GDP growth was influenced by the continuing depreciation of the Birr and demographic factors such as population growth. These dynamics illustrate the complexities of measuring economic welfare in the context of fluctuating currency values and demographic changes. Ethiopia’s GDP continued its rapid expansion in the subsequent years, reaching 1,832,786 million Birr in 2017, with a per capita income of 823 USD. By 2020, GDP had grown to 3,374,349 million Birr, and per capita income increased to 969 USD. The upward trajectory persisted into 2023, with GDP reaching 8,499,779 million Birr and per capita income rising to 1,473 USD. This significant economic expansion reflects Ethiopia’s sustained growth efforts, diversification of the economy, and increased productivity across various sectors, supported by government policies aimed at industrialization and infrastructure development. During the 1990s, Ethiopia experienced a notable 43% decline in GDP per capita measured in US dollars, indicating a period marked by economic hardship and stagnation. This decline was associated with political instability, economic restructuring, and external shocks that adversely affected economic performance. However, since 2004, Ethiopia has maintained continuous real GDP growth of at least 5% annually, signaling a recovery and the establishment of a more stable growth path. This sustained growth has been underpinned by reforms in economic governance, investment in human capital, and improvements in the business environment. Key economic indicators from 1980 to 2023 illustrate Ethiopia’s remarkable transformation in PPP terms. The country’s GDP increased from 10.5 billion USD in 1980 to 215.1 billion USD in 2017, and further surged to 393.3 billion USD by 2023. Correspondingly, GDP per capita rose from 324 USD in 1980 to 2,303 USD in 2017, reaching 3,719 USD in 2023. These figures underscore the rapid expansion of Ethiopia’s economy in terms of both aggregate output and individual income levels when adjusted for purchasing power, reflecting improvements in productivity and living standards over the decades. In nominal terms, Ethiopia’s GDP grew from 7.4 billion USD in 1980 to 92.6 billion USD in 2019, and further increased to 155.8 billion USD in 2023. This nominal growth reflects both real economic expansion and inflationary effects, as well as currency fluctuations. The substantial increase in nominal GDP highlights Ethiopia’s rising economic stature and its growing role in regional and global markets. The annual real GDP growth rate in Ethiopia has fluctuated considerably over the years. In 1980, the growth rate was 4.0%, followed by a peak of 13.9% in 1987, reflecting a period of rapid economic expansion. However, the late 1980s and early 1990s saw a decline in growth rates, with some years exhibiting negative growth, such as −2.3% in 1984 and a significant contraction of −11.4% in 1985. These fluctuations were influenced by political turmoil, droughts, and economic mismanagement, which disrupted economic activities and hindered sustained growth. From 2004 onward, Ethiopia experienced sustained high growth rates, signaling a period of economic resurgence. The GDP growth rate reached 11.7% in 2004 and remained robust with 11.8% in 2007, peaking at 11.2% in 2008. Following this peak, growth stabilized within a range of 6–10% in subsequent years, including a rate of 6.1% in 2020. The slowdown in 2020 was largely attributed to the global COVID-19 pandemic, which affected economic activities worldwide. Despite this, Ethiopia’s growth remained relatively strong compared to many other countries, underscoring the resilience of its economy. Inflation rates in Ethiopia have varied significantly over the years, reflecting changes in economic conditions and policy responses. Periods of high inflation were recorded, such as in 1985 with a rate of −11.4% (deflation) and 13.9% in 1987, indicating volatility in price levels. In contrast, inflation was relatively low in certain years, including 4.0% in 1980 and 1.0% in 1982. More recently, from 2018 onward, inflation rates have generally remained below 5%, suggesting improved monetary policy management and greater macroeconomic stability. Ethiopia’s government debt as a percentage of GDP has experienced considerable fluctuations over the years, reflecting changes in fiscal policy, borrowing patterns, and economic conditions. The debt-to-GDP ratio reached 75.3% in 1992, decreased to 68.8% in 1997, but then rose sharply to 120.8% in 1993. This volatility indicates periods of fiscal stress and adjustments. By 2023, the debt-to-GDP ratio had stabilized around 36.1%, suggesting improvements in fiscal sustainability and debt management practices. Between 2010 and 2023, Ethiopia’s economy underwent strong, broad-based growth, averaging approximately 9.4% annually from 2010/11 to 2019/20. This period was characterized by significant expansion across multiple sectors, driven by government-led development initiatives, infrastructure investments, and private sector growth. However, the growth rate slowed to 6.1% in 2019/20, primarily due to the economic disruptions caused by the COVID-19 pandemic. Despite the slowdown, Ethiopia’s growth remained robust relative to regional and global averages. The COVID-19 pandemic had a notable impact on Ethiopia’s economic growth, causing real GDP growth to decelerate from rates exceeding 10% in previous years to 6.1% in 2019/20. This slowdown was largely driven by disruptions in industry and services sectors, although growth in industry, particularly construction, and services continued to contribute positively to the economy. The pandemic underscored the vulnerabilities of Ethiopia’s economy to external shocks while highlighting the resilience of certain sectors. Agriculture, a critical sector in Ethiopia’s economy, demonstrated resilience during the COVID-19 pandemic. Its contribution to overall economic growth slightly improved in 2019/20 compared to the previous year, reflecting the sector’s ability to withstand pandemic-related challenges. This resilience was vital for food security and rural livelihoods, as agriculture remains a primary source of employment and income for a large proportion of the population. Demand-side growth in Ethiopia during this period was primarily fueled by private consumption and public investment. Private consumption remained a significant driver of economic activity, supported by rising incomes and demographic factors. Meanwhile, public investment assumed an increasingly important role in driving economic expansion, with government spending directed toward infrastructure development, education, and health services. This combination of consumption and investment contributed to the sustained economic growth observed in Ethiopia over the past decade.

Since the turn of the millennium, Ethiopia has made remarkable strides in reducing poverty, which had long been among the highest globally. At the start of the 21st century, the country faced entrenched poverty levels that affected the vast majority of its population, compounded by limited infrastructure, recurrent droughts, and political instability. However, sustained economic growth, policy reforms, and targeted development initiatives have contributed to significant poverty alleviation over the past two decades. This progress is evident in the measurable improvements across a range of social and economic indicators, reflecting the country’s commitment to addressing the multifaceted nature of poverty. Ethiopia’s advancements are closely linked to its achievements in various Millennium Development Goals (MDGs), which provided an international framework for tackling critical development challenges between 2000 and 2015. Notably, the country succeeded in eradicating or substantially reducing the prevalence of certain communicable diseases that had previously burdened its population. Efforts to combat malaria, tuberculosis, and HIV/AIDS, supported by both domestic programs and international partnerships, resulted in lowered infection rates and improved access to treatment. Concurrently, Ethiopia achieved significant reductions in child mortality rates, a key MDG target, through expanded immunization campaigns, improved maternal health services, and enhanced nutrition programs. These health gains contributed to increased life expectancy and better overall population well-being, underscoring the interdependence of health and poverty reduction. Despite these considerable advancements, poverty remains a persistent and critical issue within Ethiopia. The country continues to grapple with widespread deprivation that affects large segments of its population, particularly in rural areas where subsistence farming predominates. According to data from 2019, 68.7% of Ethiopians were classified as experiencing multidimensional poverty. Unlike traditional income-based poverty measures, multidimensional poverty accounts for a broader spectrum of deprivations, including deficiencies in health, education, and living standards such as access to clean water, sanitation, electricity, and adequate housing. This comprehensive approach reveals the complex and interrelated challenges that individuals face, highlighting that poverty in Ethiopia extends beyond mere financial insufficiency to encompass systemic barriers to human development. In addition to those already living in multidimensional poverty, a further 18.4% of the Ethiopian population was identified as vulnerable to falling into such poverty without effective interventions. This vulnerability indicates that nearly one-fifth of the population is at risk of losing their gains or slipping into deeper deprivation due to shocks such as food insecurity, economic downturns, or environmental stresses. The presence of this sizable at-risk group underscores the fragility of poverty reduction efforts and the necessity for sustained social protection mechanisms, economic diversification, and resilience-building strategies to safeguard vulnerable households. A central driver behind Ethiopia’s progress in reducing poverty has been the expansion of its agricultural sector, which remains the backbone of the country’s economy and livelihood for the majority of its citizens. Over recent decades, government policies and investments have focused on increasing agricultural productivity through improved farming techniques, irrigation projects, and access to inputs such as fertilizers and improved seeds. This agricultural growth enabled many poor farmers to benefit from rising food prices, which in turn boosted their sales and revenue streams. Enhanced agricultural output not only increased household incomes but also contributed to national food security and export earnings, reinforcing the sector’s critical role in poverty alleviation. However, the agricultural expansion has had complex and sometimes adverse effects on the poorest segments of the population. While increased food production led to higher prices, the poorest citizens, who are often net food buyers rather than producers, found themselves unable to afford these rising costs. This dynamic created a paradox where agricultural growth, intended to alleviate poverty, simultaneously imposed additional burdens on the most vulnerable households by reducing their purchasing power and access to basic foodstuffs. Consequently, food price inflation has been a significant concern in Ethiopia’s poverty reduction narrative, highlighting the need for balanced policies that protect the interests of both producers and consumers, especially the poorest. One of the foremost challenges confronting Ethiopia in its quest to eradicate poverty is the structural transformation of its economy. The country remains predominantly agricultural-based, with a large proportion of the population engaged in subsistence farming and related activities. Transitioning to a more industrialized economy is essential for creating diverse employment opportunities, increasing productivity, and generating sustainable income sources beyond agriculture. Industrialization also promises to reduce vulnerability to climatic shocks that disproportionately affect agricultural livelihoods. However, this transformation requires substantial investments in infrastructure, education, skills development, and institutional capacity, as well as the creation of an enabling environment for private sector growth and innovation. To address these multifaceted challenges, Ethiopia’s current strategy for poverty alleviation emphasizes leveraging existing government systems and development programs that have been established over years of policy implementation. This approach involves strengthening institutional frameworks, improving service delivery in health, education, and social protection, and enhancing coordination among various stakeholders including local governments, non-governmental organizations, and international partners. By building on the foundation of established programs, the government aims to scale up successful interventions, increase efficiency, and ensure that resources are targeted to the most vulnerable populations. This integrated strategy reflects an understanding that poverty reduction requires sustained, comprehensive efforts that address both immediate needs and long-term structural issues within the Ethiopian economy and society.

Until 2013, coffee stood as Ethiopia’s predominant agricultural export crop, constituting approximately 26.4% of the country’s foreign exchange earnings. This significant contribution underscored coffee’s central role in Ethiopia’s economy, reflecting both its historical importance and the global demand for Ethiopian coffee, renowned for its unique flavors and quality. The coffee sector not only generated substantial revenue but also formed a critical pillar of the nation’s export portfolio, anchoring Ethiopia’s position in international commodity markets. However, by the beginning of 2014, the export landscape began to shift as oilseeds emerged as a more significant component of Ethiopia’s export profile, reflecting diversification efforts and changing global market dynamics. This transition indicated a gradual broadening of Ethiopia’s agricultural export base beyond its traditional reliance on coffee. Despite the rising prominence of oilseeds, coffee remained critical to the Ethiopian economy, sustaining the livelihoods of over 15 million people, which represented about 25% of the national population. This vast segment of the populace depended directly or indirectly on coffee production, processing, and trade, highlighting the crop’s socio-economic importance beyond mere export earnings. Coffee cultivation was deeply intertwined with rural livelihoods, cultural practices, and smallholder farming systems, making it a cornerstone of Ethiopia’s agrarian society. The sector’s significance extended to employment generation, poverty alleviation, and rural development, emphasizing the multifaceted role coffee played within the broader economic and social fabric. In addition to coffee and oilseeds, Ethiopia’s export basket included a diverse range of products such as live animals, leather and leather products, chemicals, gold, pulses, flowers, fruits, vegetables, and khat (also spelled qat). Khat, a leafy shrub with psychotropic effects when chewed, held a unique position in both domestic consumption and export markets, particularly within the Horn of Africa and Arabian Peninsula. The variety of exports reflected Ethiopia’s rich natural resources and agricultural diversity, as well as its integration into regional and global trade networks. Leather goods and live animals, in particular, were significant due to Ethiopia’s large livestock population and traditional artisanal industries, while gold mining contributed to mineral export revenues. The inclusion of flowers, fruits, and vegetables signaled the country’s growing engagement with horticultural exports, catering to niche markets abroad. Cross-border trade conducted by Ethiopian pastoralists was predominantly informal, frequently occurring outside the purview of state control and regulation. This informal trade was a longstanding feature of the pastoral economies in the region, driven by the mobility of pastoral communities and the porous nature of borders in the Horn of Africa. In East Africa, over 95% of cross-border trade took place through unofficial channels, with the unregulated movement of live cattle, camels, sheep, and goats from Ethiopia to neighboring countries such as Somalia, Kenya, and Djibouti estimated to be worth between US$250 million and US$300 million annually. This figure was approximately 100 times greater than official trade statistics, underscoring the vast scale of informal commerce that eluded formal economic accounting. The magnitude of this trade highlighted the critical role of informal markets in sustaining livelihoods and regional supply chains. The informal cross-border trade contributed positively to the regional economy by lowering food prices, enhancing food security, reducing border tensions, and promoting regional integration. By facilitating the movement of livestock and other goods, this trade helped stabilize markets and provided affordable food sources for populations across national boundaries. It also fostered social and economic linkages among pastoralist communities, reinforcing cultural ties and cooperation. However, the unregulated nature of this trade posed significant risks, including the potential spread of animal diseases due to inadequate veterinary controls and border health measures. These challenges complicated efforts to manage livestock health and safeguard public health in the region. The Ethiopian government expressed dissatisfaction with the loss of tax revenue and foreign exchange earnings resulting from the unregulated nature of cross-border trade. This fiscal leakage prompted authorities to initiate recent efforts aimed at documenting and regulating these activities to bring them within the formal economy. Such measures sought to enhance state capacity to collect revenues, improve trade data accuracy, and implement health and safety standards. The government’s initiatives reflected a balancing act between recognizing the socio-economic importance of informal trade and addressing the need for fiscal sustainability and regulatory oversight. Ethiopia’s economy exhibited heavy dependence on a limited number of vulnerable crops for foreign exchange earnings, a situation compounded by reliance on imported oil. This dependence exposed the country to external shocks such as commodity price fluctuations and supply disruptions, contributing to chronic shortages of foreign currency reserves. The importation of oil, essential for transportation and industrial activities, placed additional strain on Ethiopia’s balance of payments, exacerbating foreign exchange constraints. These vulnerabilities underscored structural challenges within the economy, including limited diversification and underdeveloped industrial capacity. In response to persistent foreign exchange shortages, the Ethiopian government implemented a series of measures including strict import controls and significant reductions in subsidies on retail gasoline. These policies aimed to curb demand for foreign currency by limiting non-essential imports and encouraging more efficient energy consumption. The reduction of gasoline subsidies was intended to align domestic fuel prices more closely with international market levels, thereby reducing fiscal burdens and conserving foreign exchange reserves. Such austerity measures, while necessary for macroeconomic stability, had complex implications for economic growth and social welfare. Despite these interventions, Ethiopia’s largely subsistence economy struggled to sustain high military expenditures, drought relief efforts, ambitious development projects, and essential imports such as oil. The country’s limited domestic revenue base and foreign currency constraints necessitated continued reliance on foreign aid to bridge fiscal gaps and support critical sectors. This dependence on external assistance highlighted ongoing challenges in mobilizing sufficient internal resources and building resilient economic structures capable of withstanding external shocks and financing development priorities independently. In December 1999, Ethiopia signed a $1.4 billion joint venture agreement with the Malaysian oil company Petronas to develop a large natural gas field located in the Somali Region. This agreement represented a strategic effort to harness Ethiopia’s untapped hydrocarbon resources to reduce energy import dependence and generate export revenues. However, by 2010, the implementation of the project had stalled, leading to Petronas losing its license to operate in the region. Subsequently, the Chinese company Poly-GCL Petroleum became involved in the development of the natural gas field, marking a shift in foreign investment and operational control. The delays and changes in partnership reflected the complexities of resource development in Ethiopia, including regulatory, security, and infrastructural challenges. Ethiopia began exporting electricity to neighboring countries such as Kenya, South Sudan, and Djibouti, generating approximately US$300 million annually from these exports. This emerging energy trade capitalized on Ethiopia’s abundant hydropower potential and expanding electricity generation capacity. Exporting electricity not only provided a valuable source of foreign exchange but also strengthened regional energy interconnections and cooperation. The growing electricity export sector signaled Ethiopia’s transition toward becoming a regional energy hub, leveraging its natural resources to foster economic integration and development. The completion of the Grand Ethiopian Renaissance Dam (GERD) in 2023 was expected to significantly boost Ethiopia’s electricity exports, with total annual revenue projected to reach US$1 billion once the dam reached full operational capacity. The GERD, as the largest hydroelectric power plant in Africa and one of the 20 largest hydroelectric plants worldwide, represented a monumental infrastructure achievement for Ethiopia. Its vast generation capacity promised to transform the country’s energy landscape by providing reliable power for domestic consumption and export. The dam’s operation was anticipated to catalyze industrial growth, improve energy security, and enhance Ethiopia’s geopolitical influence within the region through increased energy diplomacy and trade.

Ethiopia’s trade statistics over the past several decades reveal a consistent pattern of trade deficits, with both exports and imports experiencing significant fluctuations influenced by the country’s economic development and global market conditions. In 1980, Ethiopia’s goods exports were valued at approximately $419 million US dollars, while imports amounted to about $650 million US dollars. This resulted in a net trade deficit of roughly $230 million US dollars, indicating that the country imported substantially more goods than it exported even at that time. The relatively modest scale of trade reflected Ethiopia’s economic conditions during the late 20th century, characterized by limited industrialization and reliance on agricultural exports. By 1990, Ethiopia’s goods exports had declined to approximately $292 million US dollars, while imports increased to about $912 million US dollars. This shift led to a net trade deficit of approximately $620 million US dollars, more than doubling the deficit observed a decade earlier. The reduction in export value alongside rising imports underscored the economic challenges Ethiopia faced during this period, including political instability and structural adjustments that impacted production and trade capacity. The widening deficit highlighted the growing imbalance between the country’s foreign exchange earnings and its import needs. Entering the new millennium, Ethiopia’s trade figures showed some growth but continued to reflect a substantial trade imbalance. In 2000, goods exports were valued at approximately $486 million US dollars, marking an increase from the previous decade, while imports rose to about $1,131 million US dollars. The resulting net trade deficit stood at approximately $645 million US dollars. This period corresponded with efforts to liberalize the economy and attract foreign investment, which contributed to increased import volumes, particularly in capital goods and consumer products, while export growth remained relatively constrained by limited diversification and productivity challenges. By 2005, Ethiopia’s exports had nearly doubled from the year 2000, reaching approximately $917 million US dollars, whereas imports surged to around $3,701 million US dollars. The net trade deficit consequently expanded to roughly $2,784 million US dollars. This significant increase in imports reflected the country’s accelerating demand for machinery, equipment, and intermediate goods necessary for infrastructure development and industrial expansion. Despite the growth in exports, which included traditional commodities such as coffee and emerging sectors like textiles, the trade deficit widened considerably due to the rapid pace of import growth outstripping export earnings. In 2010, Ethiopia’s goods exports were valued at approximately $2,480 million US dollars, demonstrating a substantial increase compared to five years earlier. Imports also rose to about $7,365 million US dollars, resulting in a net trade deficit of approximately $4,885 million US dollars. The expansion in both exports and imports during this period was driven by Ethiopia’s economic reforms, infrastructural investments, and increased integration into regional and global markets. Export diversification efforts began to yield some results, with growth in sectors such as horticulture and leather products, yet the country’s reliance on imports for capital goods and fuel continued to maintain a significant trade imbalance. By 2015, Ethiopia’s exports had grown to approximately $2,920 million US dollars, while imports reached approximately $14,977 million US dollars, leading to a net trade deficit of about $12,057 million US dollars. The dramatic rise in imports reflected Ethiopia’s ambitious development agenda, including large-scale infrastructure projects such as road construction, energy generation, and industrial park development. These initiatives required substantial imports of machinery, construction materials, and technology. Although exports increased, the pace was insufficient to narrow the trade gap, as the country remained dependent on a limited range of export commodities and faced challenges in expanding its manufacturing and value-added sectors. In 2020, Ethiopia’s goods exports were valued at approximately $3,253 million US dollars, while imports stood at about $11,762 million US dollars, resulting in a net trade deficit of approximately $8,509 million US dollars. This period was marked by global economic disruptions due to the COVID-19 pandemic, which affected trade flows worldwide. Despite these challenges, Ethiopia managed to increase its export earnings modestly, supported by agricultural exports and some manufactured goods. Imports, however, declined relative to 2015 levels, reflecting reduced demand and supply chain constraints. The narrowing of the trade deficit compared to 2015 indicated some progress in balancing trade, although the deficit remained substantial. In 2023, Ethiopia’s goods exports reached approximately $3,470 million US dollars, while imports escalated to about $15,318 million US dollars. This resulted in a net trade deficit of roughly $11,849 million US dollars, highlighting a renewed widening of the trade gap. The increase in imports was driven by continued investments in infrastructure, industrial development, and consumer goods demand, alongside rising global commodity prices. Export growth was relatively modest, constrained by structural factors such as limited export diversification and challenges in enhancing productivity and competitiveness. The persistent trade deficit underscored the ongoing need for Ethiopia to strengthen its export base and reduce reliance on imports to achieve a more sustainable trade balance.