Ethiopia

Politics:

• Analysis

  Ethiopia politics: Quick View - New prime minister reshuffles his cabinet

  Event

  The prime minister, Hailemariam Desalegn, has reshuffled his cabinet.

  Analysis

  Under the reshuffle-Mr Hailemariam's first since his official appointment in September 2012 (a month after he became acting prime minister following the death of Meles Zenawi)-Kebede Chane was named trade minister, while Tewodros Adhanom, formerly the health minister, was appointed as foreign minister; Keseteberhan Admassu has replaced him at the Ministry of Health. In addition, Mr Hailemariam appointed two additional deputy prime ministers, meaning that the country now has three: Muktar Kedir will also act as civil service minister (replacing Junedin Sado, whose wife is facing terrorism charges in connection with ongoing Muslim protests in the country) and focus on governance and reform. Debretsion Gebremichael, the communications and information technology minister, will focus on the economy and finance. Demeke Mekonnen also has a deputy prime ministerial role, as well as being education minister.

  No changes were made in key ministerial posts including defence, justice and agriculture, but the reshuffle marks a clear rebalancing of the ruling Ethiopian People's Revolutionary Democratic Front (EPRDF), an alliance that has traditionally been dominated by the Tigray People's Liberation Front (TPLF). Mr Hailemariam led the Southern Ethiopia People's Democratic Movement, considered the least influential member of the EPRDF alliance during Mr Meles's rule, and has now ensured that the other alliance members have deputy prime ministerial positions. Mr Muktar is a leading member of the Oromo People's Democratic Organisation; Mr Debretsion is also deputy chairman of the TPLF, while Mr Demeke is the leader of the Amhara National Democratic Movement. This would appear to mark a clear change from the centralising tendencies seen under Mr Meles. However, it is questionable whether this is because the new prime minister actively wants such a change, or lacks sufficient support within the party to replicate Mr Meles's dominant position. It could also potentially lead to a slowing of the decision-making process if the ruling party seeks to adopt a more consensual approach.

  November 30, 2012

• Background

  Ethiopia: Political forces

  The EPRDF remains dominant

  The EPRDF continues to dominate all the formal institutions of the federal republic. Despite its loss of seats in the 2005 election, the party (and its allies) still commands a solid majority in the Council of Peoples' Representatives. The EPRDF signed a formal alliance in November 2005 with the Somali People's Democratic Party (SPDP), the Afar National Democratic Party (ANDP), the Benishangul-Gumuz People's Democratic Unity Front (BGPDUF), the Gambella People's Democratic Movement (GPDM) and the Harari National League (HNL). Together they hold 371 seats in parliament, just over two-thirds of the total. The EPRDF and its allies also maintained control over all regional parliaments, except in the capital, Addis Ababa, which voted heavily for the opposition. However, the prime minister appointed a caretaker administration to run the capital in 2006, pending a new poll, after the opposition could not muster sufficient numbers to assume power. By retaining control of the regions, the EPRDF also maintains its large majority in the Council of the Federation (see Constitution, institutions and administration).

  The EPRDF comprises four main components—the Oromo People's Democratic Organisation (OPDO), the Amhara National Democratic Movement (ANDM), the Southern Ethiopia People's Democratic Movement (SEPDM) and the Tigray People's Liberation Front (TPLF). The TPLF is by far the smallest, but the most influential, having led the war against the Derg and driven the formation of the EPRDF by drawing in non-Tigrayan groups, and of course by providing the prime minister. Mr Meles faced a rebellion from within the TPLF in 2001, because of hardline anger about his peace agreement with Eritrea, but he emerged triumphant after months of feuding and purged his opponents. However, Mr Meles never won back the support of hardline Tigrayan elements, obliging him to move closer to other EPRDF parties to bolster his position. Despite the challenges, Mr Meles has maintained the EPRDF as a united entity and remains firmly in command.

  The regime suffers a spate of defections

  The EPRDF did, however, suffer a spate of defections in 2006, some fairly high-level, of diplomats and soldiers, primarily because of the post-election clampdown on the opposition and, in particular, on some Oromo organisations. The Oromos are Ethiopia's largest single ethnic group, but have a history of being excluded from political power by the Tigrayan-Amhara axis. Most defectors are sympathetic to the Oromo complaints of oppression and marginalisation, and in some cases to the outlawed Oromo Liberation Front (OLF), which is attempting to step up its ten-year military campaign against the government. Two generals and a colonel fled to arch-rival, Eritrea, after mid-2006 and declared allegiance to the Oromo Liberation Front (OLF). Other prominent defections include that of the deputy attorney-general, Alemayehu Zemedkun (who requested asylum in the US in August after refusing to take over the court case against imprisoned opposition leaders) and Teshale Aberra, the president of the Oromo Supreme Court (who fled to the UK in October 2006 citing threats and harassment). The secretary-general of the Council of People's Representatives, Foto Bedane, is also reported to have fled. The defections are not fatally damaging for the regime, but illustrate the tense political situation and the climate of mistrust.

  The opposition made a strong advance in 2005

  The opposition staged a remarkable performance in the May 2005 election, with the CUD capturing 109 seats and the UEDF taking 52 seats. The CUD—now superseded by the CUDP—did best in Amhara areas and the UEDF in Oromo areas. Both are alliances of several parties, including local and overseas entities, and both have split over the question of whether or not to participate in parliament. The CUD leadership called for a boycott (and remain in jail) but a majority of party MPs took up their seats (for fear of losing them) although they lack direction. The non-participating group, including imprisoned leaders and those in exile, are referred to as CUDP-Kinijit. The local UEDF leadership, by contrast, took the party into parliament, despite objections from overseas members, and provide the core of an effective parliamentary opposition.

  The radical opposition forms a new alliance

  In an notable development, in May 2006, CUDP-Kinijit signed an accord with the outlawed OLF, the Ogaden National Liberation Front (ONLF)—which operates in the Somali region—and other groups, with alleged backing from Eritrea, to form the Alliance for Freedom and Democracy (AFD). The AFD features such a wide diversity of components, even by Ethiopian standards, that its effectiveness is likely to be limited. The OLF and ONLF remain engaged in long-running military campaigns (of mixed effectiveness) against the government in their respective regions. The OLF was originally part of the EPRDF, but left in 1995, frustrated at making no progress towards its ambition of independence.

  Other conflicts

  The federal government confronts a low-level rebellion in Afar region. Ethiopia also faces bouts of inter-ethnic strife. Clashes in Gambella state in the south-west left several hundred people dead in 2003-04 (leading to federal intervention) and the situation remains unsettled. Human-rights observers have criticised the government's ethnic policies for increasing tensions by creating a link between socio-political rights and ethnic identity.

  March 02, 2007

• Structure

  Ethiopia: Political structure

  Official name

  Federal Democratic Republic of Ethiopia

  Form of state

  Federal republic

  Legal system

  The federal constitution was promulgated by the transitional authorities in December 1994; in May 1995 representatives were elected to the institutions of the new republic, which came formally into being in August 1995

  National legislature

  The Federal Assembly consists of the House of People's Representatives (lower house; 547 members) and the Council of the Federation (upper house; 108 members); the nine regional state councils have limited powers, including that of appointing members of the Council of the Federation

  National elections

  May 2010 (federal and regional); next elections due in May 2015

  Head of state

  President-a largely ceremonial role, appointed by the House of People's Representatives; currently Girma Wolde-Giorgis (president since October 2001)

  National government

  The prime minister and his cabinet (Council of Ministers)

  Main political parties

  The Ethiopian People's Revolutionary Democratic Front (EPRDF) won all but two of the seats in parliament in the election in May 2010; it evolved from the coalition of armed groups that seized power in May 1991: the Tigray People's Liberation Front, the Amhara National Democratic Movement, the Southern Ethiopia People's Democratic Movement and the Oromo People's Democratic Organisation; opposition parties include Unity for Democracy and Justice (UDJ), the United Ethiopian Democratic Party-Medhin (UEDP-Medhin), the United Ethiopian Democratic Forces (UEDF) and the Oromo Federalist Democratic Movement (OFDM)

  Prime minister: Hailemariam Desalegn

  Deputy prime ministers: Muktar Kedir

  Debretsion Gebremichael

  Demeke Mekonnen

  Key ministers

  Agriculture & rural development: Tefera Deribew

  Customs: Melaku Fenta

  Defence: Siraj Fegisa

  Education: Demeke Mekonnen

  Federal affairs: Shiferaw Teklemariam

  Finance & economic development: Sufian Ahmed

  Foreign affairs: Tewodros Adhanom

  Health: Keseteberhan Admassu

  Justice: Berhanu Hailu

  Labour & social affairs: Abdulfata Abdulrahman

  Mines: Sinkenesh Ejgu

  Science & technology: Desse Balke

  Trade: Kebede Chane

  Transport & communications: Diriba Kuma

  Urban development & construction: Mekuria Haile

  Water & energy: Alemayehu Tegenu

  Central bank governor

  Teklewold Atnafu

  December 13, 2012

• Outlook

  Ethiopia: Key developments

  Outlook for 2013-17

  • Hailemariam Desalegn has been endorsed by the ruling coalition as prime minister following the death of Meles Zenawi in August, reducing the likelihood of party in-fighting-at least in the short term.
  • Mr Hailemariam will continue to seek to hold together the ruling coalition's multi-ethnic framework, although this has the potential to prompt a backlash from the traditionally dominant Tigrayan faction.
  • The government is likely to be forced into an economic policy turnaround during the forecast period as it runs out of finance for its ambitious development plans.
  • The Economist Intelligence Unit forecasts that real GDP growth will average 7.2% annually between 2013 and 2017 as the dominant agriculture sector performs well, electricity supply improves and export demand picks up.
  • The pattern of gradual currency depreciation and intermittent larger adjustments adopted by the central bank will continue. We forecast a depreciation from an estimated Birr17.88:US$1 in 2012 to Birr24.50:US$1 by 2017.
  • We expect aid to dip in the run-up to the 2015 elections, raising the current-account deficit to 5.1% of GDP in that year, before it narrows during the remainder of the forecast period to 3.4% of GDP in 2017.

  Review

  • Hailemariam Desalegn has reshuffled his cabinet, producing a more ethnically balanced group. However, this may be a sign that he lacks sufficient support to maintain the centralising approach of his predecessor.
  • South Sudan has offered to mediate in the long-standing territorial dispute between Ethiopia and Eritrea, but the offer will have little impact, as South Sudan lacks the influence to produce the compromises required.
  • The IMF has concluded Article IV talks and reiterated its concern about the authorities' statist approach, saying that the public-sector-led development strategy is contributing to macroeconomic imbalances.
  • The Ethiopian Revenues and Customs Authority has exceeded its revenue-collection targets in the first quarter of fiscal year 2012/13 (ending July 7th), suggesting that efforts to improve compliance are having an impact.
  • Inflation moderated to 15.8% in October as food price inflation slowed again. Persistent fiscal deficits, weak monetary policy and a depreciating exchange rate continue to exert upward pressure on prices.
  • Ethiopia is on course to have three major dams operational by 2015, according to the water and energy minister, Alemayehu Tegenu.

  December 13, 2012

Economy:

• Background

  Ethiopia: Population

  A young and growing population

  Ethiopia's population was 74.1m in 2005, according to official sources (or 77.4m, according to the IMF), making it Sub-Saharan Africa's second most populous nation (after Nigeria). According to World Bank estimates, the population grew by 2.2% a year in 1990-2004, and is expected to grow by 2.9% a year in 2004-20. The full impact of the HIV/AIDS epidemic is uncertain, although prevalence of the disease appears lower than earlier thought (see Health). The population is still overwhelmingly rural, with only 16% living in towns (World Bank, 2004), of which Addis Ababa, the capital, is by far the largest. Several hundred thousand Ethiopians have settled in the US over the past two decades, concentrated largely around Washington DC and Los Angeles. Considerable numbers also live in the EU. Ethiopia's population is youthful, with 44.8% under 15 years old (World Bank, 2004); a similar proportion to the rest of Sub-Saharan Africa.

  The federal constitution divides the country into nine states and two municipalities, primarily on the basis of ethnicity, although none of the regions is entirely homogenous and some have considerable diversity. The Oromo are the largest group, and are dominant in central/southern areas, followed by the Amharas and Tigrayans in the north. Other large ethnic groups are the Somali, in the south-east, and the Afar, in the north-east. The government recognises 64 distinct ethnic groups. Amharic and English remain the de facto languages of state, although greater emphasis is now being placed on regional languages in schools and the official media. Regions are free to choose their own language of administration, although several have kept Amharic for reasons of convenience. Despite the state's traditional association with Orthodox Christianity, the Ethiopian population is split fairly evenly between Christians and Muslims. The post-1991 administration made progress in establishing official parity of esteem and recognition between Christians and Muslims.

  March 02, 2007

• Structure

  Ethiopia: Economic structure

  Data and charts: Annual trends charts

  
  

  

  December 13, 2012

• Outlook

  Ethiopia: Country outlook

  Ethiopia: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: The death of the prime minister, Meles Zenawi, in August 2012 has taken Ethiopia into largely uncharted territory. Mr Meles was only the country's second leader since 1977, and had been the overwhelmingly dominant political figure since the Tigrayan People's Liberation Front (TPLF) ended the 14-year dictatorship of Mengistu Haile Mariam in 1991. In line with the constitution, the former deputy prime minister and foreign minister, Hailemariam Desalegn, has been appointed prime minister, and his unanimous-if belated-endorsement by the 180-member council of the ruling Ethiopian People's Revolutionary Democratic Front (EPRDF) suggests that the party wishes him to remain in the post at least until the next elections, due in 2015. However, the longer-term prospects for EPRDF unity are more uncertain, as these will depend on whether Mr Hailemariam-who is no political heavyweight-is able to stamp his authority on the coalition.

  ELECTION WATCH: The next election is due in 2015. The EPRDF has not indicated whether Mr Hailemariam will continue to lead the coalition beyond this point; much is likely to depend on the prime minister's own performance, and on whether he is able to stamp his authority on the ruling group. Regardless of who is appointed, as long as the EPRDF stays united it would be likely to win the election, as the opposition remains held back by internal rivalry and a lack of resources. The main opposition coalition, the Ethiopian Federal Democratic Unity Forum (known as Forum, or Medrek in Amharic), has transformed into a political front with the eventual aim of becoming a single party, which should make it a more formidable united force. However, strong personalities in the six constituent parties mean that it will remain prone to splits and divisions, while its inability to raise significant funds domestically will make it relatively easy for the government to keep it marginalised. The opposition's chances of achieving some success in 2015 could depend on the country's economic performance; if, as the Economist Intelligence Unit expects, entrenched high inflation pushes up the cost of living, Medrek may be able to capitalise on voter discontent and improve on its dismal display in the 2010 election. It may also seek to make capital from the fact that Mr Hailemariam will go into the polls as an appointed rather than elected head of state. Nevertheless, the restriction of political space and liberties means that the EPRDF will probably return with a powerful mandate, if not necessarily the 99% majority that it currently holds.

  INTERNATIONAL RELATIONS: Instability in the volatile Horn of Africa will cement Ethiopia's position as the key US ally in the region. The Horn is a focus of terrorist activity, and Western countries are keen to have an influence in Ethiopia-the region's largest country, with a population of around 77m. Donors will therefore continue to turn a blind eye to abuses such as the reported misuse of aid by the authorities, accepting these as the cost of maintaining their presence. The government's engagement with regional affairs may decline over the short term as it focuses on maintaining domestic stability, but little change is expected beyond that.

  POLICY TRENDS: The policy outlook remains unchanged following the death of Mr Meles. We expect the government to adhere to Ethiopia's current economic model, but maintain that it could be forced into an economic policy turnaround if it is unable to secure the financing to support its ambitious development plans. In its Article IV report, released in October 2012, the IMF recommended that Ethiopia focus on promoting disinflation, achieving an "appropriate" pace of public investment, rebuilding official reserves (estimated to have declined by almost 31% between 2010/11 and 2011/12) and improving financial-sector stability. There is unlikely to be a rethink in the short term, but it is clear that the current policy direction, with the country's ambitious and underfunded five-year economic plan, the Growth and Transformation Plan (2010-15), largely financed by direct central bank financing and by forcing private banks to purchase Treasury bills (T-bills), is both inflationary and unsustainable. In the medium-to-long term the authorities will have to either cut spending substantially, so as to rein in inflation and make domestic debt more attractive to lenders, or return to the Fund for financing and accept the policy prescriptions that this will entail. As global economic growth slows and the government faces financing concerns, it seems likely that it will ultimately have to return to IMF borrowing, particularly as its foreign-exchange reserves are now insufficient to shelter it through a worsening in the country's terms of trade. Meanwhile, despite concerns about governance and the lack of a functioning political opposition, Ethiopia's strategic importance means that donor support will continue. The government will forge its own development policies, although if-as we expect-it agrees on a new programme with the IMF, it will need to adapt these according to the Fund's concerns. Nevertheless, it is likely to continue to bar foreign banks while maintaining its monopolies in the energy and telecommunications sectors. The sometimes conflicting agendas of maintaining a strong governmental influence on the private sector while attracting foreign investment will persist.

  ECONOMIC GROWTH: The economy will expand quickly, owing largely to the strong performance of the dominant agricultural sector. Agriculture and agro-industry will benefit from the movement of subsistence farmers into the commercial economy, helped by the expansion of road, power and market networks, as well as a rebound from drought in 2011. Industry will benefit from improved power supply; three new hydroelectric power stations in 2010 more than doubled capacity to around 2,000 mw, and a series of planned renewable energy sources should increase this to more than 3,000 mw during the forecast period (although the government's stated aim of boosting output to 10,000 mw by 2015 looks to be overambitious). However, the government's state-led development model will hinder private-sector growth, while external demand will remain muted because of the continuing economic problems in Europe-a key export market (annual growth in Western Europe is expected to average just 1.1% in 2013-17). From estimated expansion of 8% in 2011/12, we therefore expect growth to moderate to 7.5% in 2012/13. Growth should remain between 6.9% and 7.5% in 2013-17 as foreign investment rises, electricity supply increases and export demand picks up in line with faster global growth.

  INFLATION: Inflation is estimated to have moderated to 23.3% in 2012, from 33.2% in 2011. A further slowdown to an average of 14.8% is expected in 2013, as international food and fuel prices are set to moderate, while a solid primary harvest should help to exert downward pressure on domestic prices. Against that, however, fiscal deficits, weak monetary policy-particularly if the NBE resumes direct financing of the government-and a depreciating exchange rate will keep inflationary pressures high, and the rate is expected to remain in double digits throughout the forecast period, rising to 17.9% in 2017 as international oil prices rise by 4.6% and food prices gain 2%.

  EXCHANGE RATES: The birr will continue to be managed closely by the central bank, which maintains a policy of gradual depreciation punctuated by sharper downward adjustments. We expect the government to continue to use the exchange rate as a policy tool, devaluing the birr to maintain export competitiveness in the face of double-digit inflation. The pattern of gradual depreciation and intermittent larger adjustments is likely to continue, with the currency forecast to weaken from an estimated average of Birr17.88:US$1 in 2012 to Birr24.50:US$1 by 2017.

  EXTERNAL SECTOR: Ethiopia will maintain a trade deficit throughout the forecast period, although it will shrink as a percentage of GDP from an estimated 18% in 2012 to 12% in 2017. Exports are set to grow steadily, supported by a rise in electricity exports to neighbouring countries, increased domestic gold production and, in the latter part of the forecast period, a recovery in global demand. However, imports will grow more rapidly, fuelled by high demand for capital goods and, after 2013, a more moderate depreciation of the birr. The country's dependence on donors and private remittances will persist (current transfers are 70% higher than export earnings). We expect aid to dip in the run-up to the 2015 elections, widening the current-account deficit, although Ethiopia's geopolitical importance will curb reductions in its access to donor funds. From an estimated US$1.22bn (3.2% of GDP) in 2012, the current-account deficit will rise to US$2.62bn (3.4% of GDP) in 2017.

  December 07, 2012

• Forecast

  Ethiopia: 5-year forecast summary

  Outlook for 2013-17: Forecast summary

  Forecast summary
  (% unless otherwise indicated)
  	2012a	2013b	2014b	2015b	2016b	2017b
  Real GDP growthc	8.0	7.5	7.0	7.5	7.3	6.9
  Consumer price inflation (av)	23.3	14.8	13.6	13.8	14.0	17.9
  Lending interest rate (%)	14.5	12.0	11.0	11.5	13.0	13.0
  Government balance (% of GDP)c	-3.0	-3.3	-2.6	-2.0	-1.4	-0.8
  Exports of goods fob (US$ m)	3,011	3,207	3,660	4,172	4,685	4,936
  Imports of goods fob (US$ m)	-9,391	-10,091	-11,319	-12,394	-12,825	-12,989
  Current-account balance (US$ m)	-1,224	-1,733	-2,139	-2,783	-2,640	-2,625
  Current-account balance (% of GDP)	-3.2	-4.3	-4.5	-5.1	-4.3	-3.4
  External debt (year-end; US$ m)	10,237	12,423	14,720	15,743	16,487	17,144
  Exchange rate Birr:US$ (av)	17.88	20.10	21.13	22.38	24.15	24.50
  Exchange rate Birr:¥100 (av)	20.37	25.19	26.14	26.05	26.20	26.80
  Exchange rate Birr:€ (av)	22.95	25.38	26.46	27.69	30.43	30.85
  Exchange rate Birr:SDR (av)	27.43	31.99	32.73	34.31	36.23	36.79
  a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Fiscal years ending July 7th.

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  December 13, 2012

View detailed map

Country Briefing

Land area

1,221,900 sq km

Population

77m (Economist Intelligence Unit estimate for 2012)

Main cities

Population in '000 (2012 estimates, World Gazetteer)

Addis Ababa (capital): 3,480

Bahir Dar: 218

Dese: 219

Dire Dawa: 356

Gonder: 253

Jima: 208

Mekelle: 220

Nazret: 300

Climate

Temperate on plateau, hot in lowlands

Weather in Addis Ababa (altitude 2,450 metres)

Hottest months, April-May, 10-30°C; coldest month, December, 5-23°C; driest month, December, 5 mm average rainfall; wettest month, August, 300 mm average rainfall

Languages

Amharic, Orominya, Tigrinya, Afar, Somali and others; English and Amharic are mainly used in business

Measures

Metric system; also 1 gasha = 40 ha, 1 kend = 0.5 metres, 1 frasoulla = 17 kg

Currency

The birr (previously the Ethiopian dollar) = 100 cents; the single legal exchange rate is determined by a weekly auction

Time

3 hours ahead of GMT

Public holidays

January 7th (Christmas), January 19th (Epiphany), March 2nd (Battle of Adowa), May 28th (Downfall of the Derg), September 11th (New Year), Good Friday, Easter, Eid el Fitr, Eid el Ahda, Maulid; the Ethiopian calendar has 13 months

March 19, 2012