The Challenges of Poverty Reduction in Ethiopia

Poverty-Reduction-EthiopiaDecember 30, 2018 ( - Since 2000, Ethiopia has made significant progress in alleviating poverty. It has made great strides in different Millennium Development Goals; including disease eradication and reducing the infant mortality rate. Despite the efforts made, Ethiopia ranks high amongst the countries with the highest poverty rates, as per World Bank data.

The factors contributing to poverty in the country are rooted in its economic, political, geographic, demographic, environment and overall policy. Ethiopia is characterized by low income, weak capital and investment, and high unemployment rates.

Its agrarian-based economy has been subject to the whims of natural forces and it can’t sustain its economic growth and structural transformation. When an economy finds itself in this state, vulnerability and chronic poverty define the life of many. It necessitates fundamental reforms to enable economic actors to realize their potential and improve the living standards of Ethiopians.
Since 2000, agriculture has been the main driver in reducing poverty, according to the World Bank’s recent poverty assessment. From the year 2000 to 2011, the level of poverty fell from 44% to 30% due to investment in the country’s economy.

In line with its development agenda, Ethiopia’s government has invested in promoting social progress and poverty reduction. Public spending in pro-sectors increased from 57% in 2004/05 to two-thirds in 2016/17. Among the notable sectors are; education and roads.

At the same time, since ascending to power, Prime Minister Abiy Ahmed, has realized the important prerequisites for development, which include peace and stability, a good governance structure rooted in accountability and transparency, popular participation, freedom, as well as human and property rights.

Despite these positives, the impediments to poverty reduction in the country is rooted in a complex web:

- The central challenge to ending poverty in the country is how the agriculture sector can be transformed so that it doesn’t trap the 80% of the population that considers it their sole source of income. The significant challenge in this regard is how to achieve structural transformation in a sector that is largely rural. These transformations require capital-intensive investments in farming practices, technology, and human capital.

- Second, there is the issue of land ownership that should be accompanied by further reforms. Despite the agricultural sector employing a huge percentage of the population, it is riddled with problems that have accumulated over the last decades and needs unburdening. There exists the apparent lack of lands and off-farm employment that must be addressed moving forward.

- Third, the huge percentage of Ethiopians engaged in agriculture have overburdened the sector and there lacks appropriate measures to come up with a population policy to address the large number engaging in agriculture.

- Fourth, there are those who survived the hostile childhood and economic environment, and they barely made it. In 2011-2012, 34 million (about 40% of the population) was malnourished, compared to 48% in 2004-06. In 1992 it was 34 million, according to data from the Food and Agriculture Organization (FAO). These figures indicate a worrying trend; there is no significant change in the number of those malnourished, stunted and debilitating over the past two decades. It clearly shows how most Ethiopian children are born to languish in debilitating poverty.

- Fifth, investments in agriculture come from the smallholders and the peasants, and not external forces. Small farmers try to improve their daily activities via credit schemes. Despite these improvements, they lack enough funds to invest in the technology necessary to improve their source of income.

- Upon harvest, farmers set high food prices to increase their income, but this comes at a cost to the poorest citizens as they can’t afford to buy food.

- Whereas the government is committed to opening up the rural areas, mobility is still an issue. Also, Ethiopia is yet to become stable. As reported in the BBC, violence is still rampant in many parts of the country and has led to the tragic loss of lives. Correspondents suggest the ethnic clashes in different parts of the country is the greatest challenge facing the reformist Prime Minister Abiy Ahmed, leave alone the challenges in reducing poverty.

- Ethiopia’s economic progress arouses questions of equitable growth and redistribution. Though economic growth isn’t enough to alleviate poverty and inequality, there lacks measures to ensure the poorer strata of society are incorporated into this economic development.

- Whereas Ethiopia insists leasing land to foreign entities can help modernize farming and enhance the lives of its people, the country continues to languish in hunger and under-nutrition. A UN report indicates that such approaches negatively impacts the local population.

Positive Response:

Despite the challenges Ethiopia faces in reducing poverty, the country has responded well, especially when it’s compared with other countries in Africa; it is only Uganda that has had higher annual poverty reduction in the same era. Education, health and living standards have improved, with undernourishment reportedly down to 35% from 75% since the 90s.

What Ethiopia Should Do to Deal with the Challenges Identified:

Poverty in Ethiopia has varied features and causes related to political, social and institutional systems. It cannot be eradicated if fundamental political and institutional reforms are not instituted. The insecurities and bottlenecks must be removed from the shoulders of the peasants who make up the majority of the population.

Again, impediments to poverty reduction can be blamed on the policies and institutions, which limit Ethiopia’s ability to sustain shared economic growth. These forces limit the proper allocation of resources, both human capital and physical, the growth of the economy, innovation, and adaptation of technologies. They must be erased by Abiy’s regime as soon as possible.

The present government should also engage in efforts to proactively shape socio-economic policy. In pursuit of an ambitious transformation agenda of making Ethiopia a middle-income country come 2025, the country must invest in socio-economic infrastructure. The public service must be streamlined, tax collection must be revamped and key sectors like agriculture and industry must be given first priority.

The emerging policy issues stem from the drive to achieve the 2030 goals, which is a framework that can potentially address the deficits in poverty eradication. In this regard, it is important for the country to continue promoting a conducive political and economic environment necessary to realize this goal.

Furthermore, Ethiopia is prone to climatic shocks, and it is important to invest in building resilience to the varied stressors like drought and climate change, fortified by the humanitarian development relationship.


Though the country started at a slow pace, its investment in pro-poor sectors is paying off and has resulted in significant achievements in the economic progress and poverty reduction.
Ethiopia is often unfairly viewed as emblematic of poverty and deprivation, but in recent years, it has made significant progress that should change that perception. If the country continues with this trend over the next decade, it can propel itself and its people into a new era.

To realize its ambitious 2030 development agenda, Ethiopia should continue investing in agricultural growth and basic services, alongside efforts to offer sustainable support to self-employment. It must also encourage the entry and growth of firms, while helping households curb the constraints leading to urban migration, which can help reduce poverty and promote prosperity for its citizens.

By Solomon O. for Ezega News



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