Although achieving lower middle-income status by 2025 is ambitious, Ethiopia is making strides in combating poverty and improving economic growth with the poverty rate falling from 44% in 2000 to 23.5% in 2015-16.

By Bashir Ali (Global Risk Insights) |

Not many may know that Ethiopia was among the first countries to join the International Monetary Fund (IMF) when the latter was formed on 27 December 1945.  Nevertheless, it took another 72 years for Ethiopia to welcome its first visit from the IMF Managing Director, in this case, Christine Lagarde who in December 2017 visited Addis Ababa, Ethiopia and met with Prime Minister Hailemariam Desalegn. This followed the IMF’s  assertion that in 2017 Ethiopia’s economy surpassed Kenya’s to become East Africa’s largest economy. Lagarde’s visit served as the latest stamp of approval for Ethiopia’s bold plan to reach lower-middle income status by 2025.

Ethiopia’s growing economy

It was Ethiopia’s late President Meles Zenawi who crafted Ethiopia’s ambitious goal of becoming a lower middle-income country by 2025. Following victory in 1991, the ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF) set in motion far-reaching economic reforms aiming to transform this poverty-stricken nation into a “developmental state” while maintaining an iron grip on power. Although achieving lower middle-income status by 2025 is ambitious, Ethiopia is making strides in combating poverty and improving economic conditions with the poverty rate falling from 44% in 2000 to 23.5% in 2015-16 (IMF, 2017).

Ethiopia’s government has made great strides in raising Human Development indicators, increasing female labor force participation as well as pursuing pro-poor growth policies. In the last decade Ethiopia has consistently registered double-digit GDP growth buoyed by state-led investments in infrastructure and manufacturing. According to the IMF Ethiopia’s economy will expand by 8.5% in 2017/18.

This growth will be supported by infrastructure spending and Ethiopia’s attempts to become a regional manufacturing base, in contrast to resource dependent economies in Africa such as Nigeria. The 2014 fall in commodity prices has had a negligible impact on Ethiopia’s economic growth trajectory and for this reason Ethiopia is becoming the new standard for a working, non-resource rich, African economy.

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