Poverty Declines in Ethiopia With Little Help From Industry

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Acknowledging the improvement of poverty reduction in Ethiopia, the latest report of the World Bank (WB) revealed that the poverty level in Ethiopia had declined from 44pc to 30pc with little contribution from the industry sector.

“Agricultural growth was the main driver of poverty reduction in Ethiopia since 2000, and poverty in Ethiopia fell from 44pc in 2000 to 30pc in 2011, which translated to a 33pc reduction in the share of people living in poverty,” said Ruth Vargas Hill, Senior Economist, Africa Region for poverty reduction and economic management.

The report attributed the decline rate of poverty was reinforced by high and consistent economic growth which now stands 10.9pc averaged annual rate, which is unacceptable for the macro economist who believed the growth rate that is used as an input is exaggerated.

Moreover, the 226 page report by the World Bank and entitled as Ethiopia Poverty Assessment Overview that was released on Monday January 19, 2014, shows the contribution of agricultural sector for the national economy is significantly decreasing and the service sector is dominating in recent years.

“Over time the importance of agriculture has fallen from 52pc in 2003/4 to 40pc in 2013/14 and the importance of the service sector has increased from 37pc to 46pc during same time,” reads the report.

It also points Gross Domestic Product (GDP) growth outpaced population growth, which has averaged about three percent and Ethiopia recorded annual per capita growth rates of 8.3pc over the last decade.

“Decline of Agriculture sector contribution to the national economy is acceptable but the growth of the service sector is not abnormal because the industry should dominate the economy for a country like Ethiopia,” said the macroeconomist.

“Even if the growth of the service sector did not came following the growth of the financial sector, rather following the increase of public expenditure,” he calms.

By rate of higher annual poverty reduction, the Bank ranked Ethiopia second after Uganda, with Nigeria, Malawi, Senegal and Rwanda following Ethiopia. Health, education, and living standards have also improved, with famine down from 75pc to 35pc since 1990, according to the Bank.

Since 2005, agricultural growth has been responsible for reduction in poverty of four percent a year. Increased use of fertilizer, high food price and favourable weather for the farmers were major source for higher incomes for poor farmers. It also attributes Safety Net Program alone has pushed 1.5 million people out of poverty, according to Hill.

At the same time, the report revealed the very poorest in Ethiopia have become even poorer following the high food inflation rate. The high food prices that improve incomes for many poor farmers become more challenging for the poorest. The report also point out the high food inflation has resulted 37 million Ethiopians remain either poor or vulnerable to falling into poverty.

For sustainable reduction of poverty the report urges that Ethiopia should continue focusing on agricultural growth and investments in basic services, the potential of migration and non-agricultural growth has been largely missed. Alongside ongoing efforts to support self-employment, encouraging the entry and growth of firms and helping households overcome constraints to urban migration. It also suggests safety net programs will need to adapt to the changing landscape of poverty in Ethiopia.

If this progress continues over the next decade, Hill says, Ethiopia could drive itself into a new era of prosperity.

“Agriculture has not been growing for the past four decades,” claims a macro economist Fortune talked to.

He says productivity per hectare of crops stands still at 16ql per hectare, despite the Growth Transformation Plan (GTP) targeting to reach to 22ql per hectare.

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