Dialogue  October - December 2005 , Volume 7  No. 2

Poverty in Ethiopia

Dr. Akhilesh Chandra Prabhakar

Ethiopia is the least developed countries in the world. Ethiopia is ranked at 210th out of the total of 210 countries in GNP per capita terms.1 Measured by per capita GDP, Human Development Index, health status as well as other macroeconomic indicators show that the level of poverty is so intense. Its per capita income, although varies slightly from one source to another, is one of the lowest in the world-only about $100 per annum.  
    According to the household income consumption expenditure survey results, almost half of the country’s population can hardly afford the minimum basic food requirements. According to various sources; about 89 percent of the population lives under a 2 dollar, and 46 percent of the population of Ethiopia lives under a dollar a day. Too small landholdings, poor agricultural practices, a lack of potable water, and other factors contribute to a vicious cycle of deteriorating health and environments — and to increasing poverty. 
    Agriculture is still the mainstay of the economy accounting for about 50 percent of GDP, 85 percent of the labour force and 90 percent of export earnings. The industrial sector on average contributes only 10-12 percent of GDP. The service sector grew moderately but with large variations in the performance of the sub-sector. During the period of the Marxist regime the share of agriculture was 53 percent in GDP and now the present regime, it is 51 percent. The highest rate of growth in agriculture during the Marxist regime under consideration was achieved during the drought year of 1984-85 where it declined by about 21 percent. The average growth rate in agriculture during the last ten years of the Marxist regime was a mere 2 percent which is significantly lower than the rate of growth of population. Despite massive efforts by the present EPRDF govt. to improve the sectors performance, agricultural production didn’t show a significant improvement over the Marxist regime.
    Industrial sector’s contribution to the country’s GDP on the average between 1980/81 to 1990/91 was 12.2 percent and it remained static over the period 1992/93 to 2004-05 with average 10.6 percent of GDP. The fact that the industrial sector accounted for merely 12 percent of GDP implies that industrialization in Ethiopia still remains low due to the poor stage of infrastructutre, limited investment, inefficiency in production, distribution and other structural problems.
    Under the circumstances of negative savings, investment was financed partly through domestic government borrowing foreign loans and grants significantly increasing the country’s debt exposure.

Trade Structure of Ethiopia

The tragedy of the Ethiopian economy of the past half century is revealed in its trade structure. The country continues to export the same primary commodities, dominated by coffee and imports manufactured goods as it did half a century ago, a conspicuous revelation of the absence of structural transformation. The consequence of the absence of structural transformation is that the capacity of exports is declining, leading to higher debt levels. While imports as percent of GDP has been increasing at a faster rate, exports have failed to match the increase in imports, resulting in a widening gap between the two. The growing imbalance has necessitated the search for an ever increasing external financing in the form of aid and credit. Currently, the country has reached a stage where it can’t function properly without the inflow of external assistance. At the same time the external debt burden has grown to a level it is beyond its capacity to pay.

Dependent on Foreign Aid

The structure and performance of the Ethiopian economy has made the country to be increasingly dependent on foreign aid during the last four decades. This poor performance of the economy adversely affected the mobilization in international financial resources and low capacity of foreign exchange earnings coupled with the growing resource requirements for the implementation of development project. Thus, foreign aid has been a prominent and enduring feature of the Ethiopian economy. Most financial flows to Ethiopia are from official creditors. The official creditors consist of Multilateral and Bilateral donors or lenders. Bilateral refers to borrowing from national governments or on government to government basis depending on political and ideological affiliations. Multilateral aid is channeled through International organizations such as the World Bank, IMF. In this case aid from advanced countries is centrally pulled and shared out among African countries according to some ethical, economic and political criteria. Bilateral sources among others are OECD, CMEA and OPEC while multilateral sources include international development association (EDA), European Economic Commission (EEC) and the World Bank. It is clear that the allocation of foreign aid is rarely determined by development needs of Ethiopia. Aid flows to poorest countries has fallen from $58 billion in 1990 to $52 billion in 2001 and now represents less than a quarter of 1 % of donor Gross National Income (GNI).  
    Aid flows to Ethiopia has fallen from $1089 million in 1993 to $ 668 million in 1998. In other words; aid as percent of central government expenditure fell from 9.2 percent to 5.3 percent in 1998.

An Assessment of Rural Poverty

On the basis of information from various sources, it was estimated that of the approximately 6.9 million people living in urban areas, about 4 million (58 percent) live below the poverty line; half of these people are desperately poor. An assessment of rural poverty was based on analyses relying on estimates of farmers’ assets (farm area, the number of oxen per farm), their location, and their vulnerability to poverty. On this basis, it was estimated that 30 percent of farm households are chronically poor. Assuming a household size of five, this amounts to about 12.6 million rural people. If those who are vulnerable to poverty (17 percent) are added, then there are an additional 7.4 million, giving a total of about 20 million rural poor.  
The increase in calorie intake in rural areas is not inconsistent with the level of real per capita spending on consumption. First, rural people spend (use their produce) more on food than on non-food items. In fact, in Ethiopia a considerable proportion of total consumption is accounted for by one’s own production. Second, the survey results indicate that the food share in rural area has increased from 60 percent in 1995/96 to 67 percent in 2004/05. While on the other hand, food share in urban areas declined from 56 percent to 53 percent during the same period. Third, it must also be underlined that an increase in the calorie content of the consumption basket doesn’t necessarily indicate an increase in food quality. A high proportion of the budget being allocated to basic food consumption is still an indication that people in rural areas are food insecure.

Low status of Ethiopian women

The National Policy on Ethiopian Women (1993) and the National Population Policy of Ethiopia (1993) highlight the low status of the majority of Ethiopian women as a serious development issue. The micro-level research found that women are seriously under-represented in local government, on school committees, and in traditional governing institutions; that they have less access than men to education and health services; and that their reproductive-health status gives cause for extreme concern. They are highly likely to experience genital mutilation, early marriage and early pregnancy, high fertility rates, and life-threatening abortions. They receive almost no medical attention throughout their reproductive cycle. In all rural sites, men commented that women and children suffer more from poverty and hunger, and those women and girls suffer particularly because of their workloads, which include regularly carrying heavy burdens.
    Women and men in all sites stated that everyone was getting poorer, even those who were better off before the drought. The main source of household income (men’s) had been eroded. Household food security had diminished to unsustainable levels, and the dependence on women’s low-income petty trading had increased. Between 70 and 85 per cent of households in each community were classified as ‘worst off’.  
    ‘Worst-off’ households are those with a family of 10 or more, or with at least three small children. These households cannot feed, clothe, or wash their children, nor send them all to school or treat them effectively when they are sick. They are households where the husband has died, or which have no reliable (male) employment and survive on intermittent daily labour (by men) or on the proceeds of women’s petty trading.
    About 30 per cent of households were headed by women in Addis Ababa, Delanta Dawunt, and Jijiga; they ranked among the poorest of all. Worst-off households have no livestock and/or have no land at all. Households where either or both adults are too weak to work, or where there is a serious illness, are extremely poor. Children in these households contribute their labour to domestic, agricultural, and income-earning tasks. They cannot afford to use government education and health facilities. Many children are not in school because of their family’s low income, or because of hunger and untreated diarrhoeal diseases. The main ‘shocks’, apart from underlying climatic disasters, that seriously increase poverty are similar to all sites. They include the death or serious illness of the male head of household, the loss of a job or harvest, other serious illness, and death of livestock.

Hunger and food shortages

Chronic malnutrition is a persistent problem. Farming families cannot produce enough to live on, and secondary sources of income are inadequate to purchase sufficient food. During the frequent droughts, livestock prices plummet, and grain prices increase. In Delanta, while grain prices increased, the sale value of livestock had dropped by 65 per cent. When livestock die or lose value, there is no safety-net left, and no food aid to maintain nutrition levels until the next harvest.

Children’s labour

Girls and boys are significantly engaged in income earning and domestic work. In all sites it was found that girls’ heavy domestic workloads free their mothers for trading. Children’s labour is viewed as preparation for their future roles and is crucial to subsistence. Girls in Delanta said, ‘If our fathers could get a harvest, we could go to school’.  
    In all rural sites, girls said that if there were grinding mills nearby, ‘we children would not have to grind grain by hand’. In Delanta boys and girls collect firewood on steep ravines to sell 15km away. Children cited accidents on the ravines as a main health problem. In Addis Ababa and Metta, children are engaged in street hawking and petty trading, girls alongside their mothers; this is a main reason for boys from the poorest families to stop attending school. Children in urban areas become vagrants: ‘Our children sometimes beg or steal money for food’ (mothers, Addis Ababa). Girls in Addis Ababa and in Delanta Dawunt worked in the sex trade and in bars.
    We have used the main indicators of poverty at consumption levels. Ethiopia, the major barriers to development and the main indicators of poverty include the following:  

²   the low status and under-representation of women;
²   the fact that coping strategies have become main sources of livelihoods;
²   the low educational status of adults and children;
²   the increased burden of labour on women and children, who must work to earn income for daily        
²   widespread indications of malnutrition and high mortality rates among infants and children;
²   miscarriage and anaemia among pregnant girls and women, and high maternal mortality rates;
²   widespread dependence on traditional structures and practices for governance, healing, and 
²   the persistence of harmful traditional practices such as Female Genital Mutilation (FGM),
        What we found makes for grim reading. For example:
²   only 45% of households consume the World Health Organization’s minimum standard of   2200         
               kilocalories of food per adult per day;
²   42% of the children under 5 years of age are underweight;
²   75% of poor families share their sleeping quarters with livestock overnight; and
²   40% of children sleep on the floor.

The Economic Reform Program

The economic reform program introduced by the Ethiopian Govt. in October 1992, the key features of the policy reform are a shift to a market economy, agricultural-development-led industrialisation (ADLI) as the long-term development strategy, and the adoption of a macro-economic stabilisation and structural adjustment programme. The main elements of the macro-economic stabilisation and structural adjustment programme in Ethiopia are the following: 
²   tax-regime reform, mainly by broadening the tax base and reducing income taxes and taxes on 
                foreign trade;
²   controlling and prioritising government expenditure in favour of social and economic infrastructure;
²   restructuring public enterprises for management autonomy and eventually privatising them;
²   liberalising the factor and product markets and removing subsidies, so that resource allocation is led 
                by market forces;
²   devaluing the exchange rate and determining it by open auction;
²   changing the investment climate to encourage private investment;
²   liberalising the interest rate;

Ethiopia’s Education and Training Policy

Education and Training Policy (1994), adopted by EPRDF regime, is completely a duplicate copy of Western countries especially of the USA. The syllabus patterns and the patterns of appointments in the universities and colleges are the same like the USA and Europe. They don’t seeks to provide ‘relevant quality education to the rural population’. Rural livelihoods are no longer valued, nor are they perceived as sustainable. Relevant education is seen as that which provides skills required for livelihoods outside the agro-pastoral economy. Successive droughts and/or flooding have depleted livestock numbers, ruined harvests, and eroded women’s and men’s sources of income from crops, livestock products, food processing, and/or daily farm labour. Increased poverty in better-off households results in the loss of employment opportunities for women, men, and children in the poorest households. The fall in the value of the narcotic drug ‘chat (in Metta) has reduced incomes, threatened food security, and reduced access to credit for personal needs.
    The challenge is to regenerate the rural economy with alternative sources of employment and income for both women and men. Unemployment hit Cherkos, a military community in Addis Ababa, after the reduction of the armed forces in 1991. The loss of military-service incomes has also had a negative impact on informal- sector trading, services, and women’s incomes. Unemployment in urban areas is also a major problem and begs the question: education for what future? Employment generation has to be tackled, alongside education reforms. Unemployment and low-income poverty are key issues to be addressed if access to health and education services is to be improved in Ethiopia. Women need income-earning possibilities that are less intensive in terms of labour and distance, and result in higher returns per hour worked. Men need alternatives to agriculture, especially in areas prone to recurrent droughts.  
    In summary, if the landless, refugees, the displaced due to war, and demobilized soldiers in poverty are included, there are a total of about 27 million people out of a population of about 52 million (52 percent) living in chronic and transitory poverty in urban and rural areas in Ethiopia. The social impact of poverty in Ethiopia is reflected in the following indicators. Nearly one quarter of children born do not reach the age of five. In rural areas, only about 12 percent of people have access to safe water, while less than 50 percent of the population is within 10 km of a health facility of any kind. The number of people per physician in Ethiopia is about 79,000 compared with 25,000 in low-income economies in Sub-Saharan Africa.  
    The EPRDF is an unpopular minority govt. Students and Youth of Ethiopia particularly Students of Addis Ababa University, have agitated against the EPRDF’s policy. In May, 2005, almost 48 peoples have died and hundreds injured during an agitation against the EPRDF govt. But there are no any Left Parties or Groups. Without democratic institutions and organizations, mass movements can not buildup. It will be necessary to strengthen the workers, peasants, youth, students, and women’s movement against the corrupt and anti-people EPRDF govt. that running as supported by America.

1.   See World Bank report 2004.
2.   See Mulugeta Haile (2004), ‘The Role of Foreign Aid on Poverty Reduction: The Ethiopian Case’ 
           dissertation submitted to the Dept. of Economics, Faculty of Business and Economics, Addis Ababa 
           University, Ethiopia.

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