The State of the Ethiopian Economy

1
The State of the Ethiopian Economy

• Performance of the Economy
• Fifteen years of Market Econmy

2
Map of Ethiopia
3
Area and Population

• Area 1,127,127 sq km
• Land 1,119,683 sq km
• Water 7,444 sq km,
• The total area of Ethiopia is
• 3,15 X greater than that of Germany
• Population ca 73 million
• Resources Gold,platinium,iron ore,
  marble,nickel, phosphate, silica sand, tantanum,
  coal, natural gas and other mineral ressources
  are available. Ethiopia has a potential to
  produce 2.6 million tons of fish every year. Only
  200 000 tons is produced.
• Ethiopia with its 7 major drainage basins is
  called the Water tower of East Africa. The
  potential for hydroelectric power is very great

4
Landscape of Ethiopia

• Major rivers and their origins

5
Climatic conditions of the country

• The unique landscape of the country endows her
  with three different types of Tempratures.
• Dega(cool zone) areas above 2 600 m(8 530 feet)
• Woyna Dega(TemperateZone) areas between 1500
  m(4920 feet) and 2600 m(8530)
• Qola Hot( Zone) Areas below 1 500 m(4920 feet)
• Lowest point Denakil Depression-125 m
• Highest point Ras Dejen 4,620 m
• The temperature varies between 16 degree celsus
  to 30 degrees
• celsius in dega and woyna dega, where as in
  qola between 27 to 50
• dgrees celsius lies

6
Area under cultivation

• Out of the total arable land of 10,71
• Permanent crops 0,75
• Allmost over 90 is unused
• Irrigated land 1,900 sq km

7
The following pictures showbad soil management
and farming system
8
Land management continued
9
Land management continued
10
Land management continued
11
Demographic development

• Ethiopia has one of the most growing
• Populations in the world
• 2,36 annually

12
Age Structure and Sex Ratio Life expectancy

• 0-14 years 43
• 15-64 years 53.4
• 65 years and over 2.7.
• 1.03 Male /1 female
• fertility rate 5.33 children born/women
• Infant mortality 95.32 deaths/1000
• Male 105.3 deaths/1000 live births
• Female 85.05 deaths/ 1000 live births

13
Continued Life expectancy HIV/AIDS

• Total population 48.83 years
• Male 47.67 years
• Female 50.03 years
• The adult HIV prevalence in the country is
• 6.6
• The estimated HIV prevalnce in urban areas is
  13.7
• In rural area is 3.7
• 3.0 million people with HIV/AIDS
• Children with HIV/AIDS 230 000
• Highest infection rate 15-24 age group
• Among these the neumber of females infected 3X
  greater than the males

14
Economic Performance GDP Composition by Sector

• Agriculture 47
• Industry 12.4
• Service 40.6

15
Labour force by Occupation

• Agriculture and Animal Husbandry 80
• Industry Construction 8
• Government and Service 12

16
Characteristic of the Agricultural Sector

• Mainly subsistence in nature
• Very low productivity
• Very low income generating
• Very low value added, dependet mainly on
  rainfall
• Very low linkage effect
• Very low investment
• yet over 80of the people generate their
  income from this sector

17
Contribution of the Agricultural sector to the
Export sub-sector

• Coffee, hides and skines, pulses and oil
• Seed, and khat contribute about 85 of
• export earnings
• out of this, coffee alone amounts to 60
• of the export earnings
• The price of coffee on the World market
• has great impacts on government revenue
• and imports of capital goods

18
Development of Coffee prices on the Wold market
over the last 30 years
19
Coffee price developments

• Coffee is the second product next to
• petroluem which is heavily traded
• 70 of the worlds coffee is grwon on farms
  smaller than 10 hectars(lt 25acres)
• Untill 1989 coffee prices were guranteed
• until 1989 coffee prices never fall below 1.20
  per pound
• After the break up of the agreement, it fell to
  50 cents per pound
• A decade ago offee producing countries were
  receiving 10 billion out of 30 billion sold
  on world market. Today it is only 6 billion,
  where as the market prices has went up to 55
  billion, nearly doubled.

20
What does it mean for Ethiopia ?

• 15 million farmers are dependent on coffee
  farming
• Price fluctuation affects the farmers heavily
• Farmers receive prices that is below production
  costs
• Family labour is not calculated into the
  production cost
• A typical Ethiopian farmer receives less than 1
  per cent of what a Canadian consumer pays for the
  lattes
• Farmers sell red cherris for 1 birr or 11 cents
  per kg
• As coffee prices went down, poverty is
  widespreading in rural areas.
• Some compelld to destroy their coffee plantaions,
  and started planting kchat.

21
A typical coffee farmer family in Ehiopia looks
like this and this year after year
22
Income from coffee for the country in general

• Ethiopia Coffee Sector Production, Prices and
  Exports, 1997/98-2003/04
• __________________________________________________
  ______________________________ _
• 1997/98 1998/99 1999/2000
  2000/01 2001/02 2002/03 2003/04
• (In metric tons)
• Production 230,00 232,000 230,000
  221,000 230,000 241,500
  253,575
• (percent
• change) 0. 0.9 -0.9
  -0.9 -3.9 4.1
  5.0 5.0
• Exports 120,00 101.231 116,557
  96,000 100,000 111,000
  115,600
• (percent -2.6 -15.6 15.1
  -17.6 4.2 10.0
  5.1
• Export
• earnings 420 281
  262 175 155
  178 203
• millions of
• US
• Percent
• change 18.3 -33.1
  -6.8 -33.2 -11.4
  14.8 14.0
• (in birr per metric ton
• Producer 13,312 11,441 11,510
  9,406 8,099
• Price

23
Production, Exports and Earningsfrom coffee
24
Effects of Market Economy after 1992 SAP
and its effects

• The role of the state was heavily diminished
• Devaluation of birr in terms of US ,
• birr was devalued almost 100 from 2,05
  birr to 5 birr, and rose successively
• now almost to 11 birr per 1US
• Import liberlization
• Privatiztion of state owned factories

25
SAP and its effects on the Ethiopian economy

• Mass eviction due to privatization
• in the first year of privatization almost
  over
• 50 000 people have lost their jobs
• On the other hand, privatization has brought a
  new pattern of ownership. Few people became rich
  at the expence of state property
• Devaluation means that import prices became
  expensive, where as export goods became cheaper
• The so-called elasticty demand did not work here
• Liberlization of trade opened the door to goods
  which compete against internal goods
• A new pattern of consumption has been introduced
• As a result, the production capacity of the
  society is heavily diminished

26
SAP and its Effects Economic
Growth or Economic development ? Real GDP
Growth

27
The Structure of growth

• Growth is more effetced due to invstments
• in food sub-sector
• Investments in manufacture sector other
• than food processing is negligable
• No strategic Investment has taken place
• Investments in machines,steel and iron factories
  are negligable
• No research and development
• New Investment , widenening and capital deepening
  are not known

28
Total Investment as of GDP

• There is a remarkable growth of investment over
  the last 10 years. The investment structure and
  the volume of investment as GDP is still very
  low, and it is 16
• the following graph shows the share of
• investments of the private and public sector

29
Total investment as of GDP inabsolute US
30
Investment Projects from 1992/93 2004/05

• 13,504 investment projects involving Birr 149.2
  billion capital were licensed over this period
• Of the total projects, 12067 or 89 were
  domestic, 1364 or 10.1 foreign and 73 or 0.5
  public
• In terms of investment capital 91.2 billion or
  61.1 were domestic, 41.4 billion or 27.7
  foreign and 16.7 billion or 11.2 public

31
Investment by sector by region

• 919 or 32 of the total projects licensed were
  in industry followed by agriculture
• 16.1, hotel and tourism 9.4, education and
  service 6.1 , real estate development 5.8 and
  construction 5.2
• Out of the total investment projects, 49.4 were
  located in Addis Ababa
• Oromia, Amhara and Dire Dawa, have a share of 24
  percent, 17.8 percent and 5.7 percent
  respectively.

32
Composition of the Manufacture Sector

• The manufacture sector yields very low
  value-added products
• It is insufficiently linked with the other
  sectors
• Very low inter-industrial trade or connection
• Dependent heavily on foreign imported goods
• Yields very low employment opportunities
• It has very low multiplier effect
• And it is still characterized with
  import-substitution industrialization
• Hence the general accumulation effect is very low
  
• As a result the home market is undeveloped

33
Ethiopias GDP compared tothat of Germany

• Ethiopias total GDP US 6.4bn
• Germanys total GDP US 2446bn
• Germanys GDP is 382 X greater than that of
  Ethiopia
• Ethiopias per capita income is US 100
• Germanys per capita income is US 29700

34
GDP Distribution by sector
35
Employment growth by Sector

• 1984-1994 1994-1999
• Agriculture 6.0 -2.9
• Mining 4.4 0.8
• Construction 7.9 24.2
• Electricity 7.8 5.9
• Trade others 6.9 17.2
• Transport 8.8 -2.7
• Finance 5.7 37.3
• In the manufacture sector the growth in
  employment is generally negative

36
Income distribution

• Gini coefficient
• Percent of total income earned by the
  richest
• 20 of the population 47.7
• Percent of total income earned
• by the poorest 20 of population 7.1
• Percent of population living
• on less than 1 a day 31.3
• Percent of population living on less
• than 2 a day 76.4

37
Balance of Payments, Ethiopia 1991/92-2000/01(mill
ions of U.S.dollars)

• Indicator 1991/92 1992/93
  1993/94 1994/95 1995/96 1996/97 1997/98 1998/99
  1999/00 2000/01
• Balance of payments -205.7 -178.1
  277.6 166.1 -43.6 -213.2 -22.5
  -46.9 -312.8 -70.5
• Current account -391.6 -587.7
  -296.8 229.3 -611.1 -180.3
  -194.9 -701.8 -615.2 -644.7
• Trade balance -720.6 -952.3
  -575.1 593.8 -999.15 -548.0
  -614.2 -1,073.8 -1,125.1 -1,101.7

38
Foreign debt

• Ethiopia's debt reached at the end of 1990s 10.4
  billion
• Interest and principal arrears accumulated,
  reaching 84 of GNP and 506 of exports by 1997
• In 1999 Russia agreed to cancel about 80
  (4.8billion) of Ethiopia's debt
• This reduction combined with debt relief from the
  Paris club, the cancellation lowered the debt to
  5.3 billion and reduced debt service to 189
  million in 2000/01
• Compiled by Fekadu Bekele
• March 18, 2007