Development Initiatives: Africa hub

Ethiopia
Resources for poverty eradication: A background paper
Peace Nganwa February 2013

Ethiopia | 2

Contents
Overview ................................................................................................................................................. 3 Summary of findings ........................................................................................................................... 3 Socio-economic analysis ......................................................................................................................... 5 Population ........................................................................................................................................... 5 Poverty indicators ............................................................................................................................... 6 Multidimensional Poverty Index ......................................................................................................... 6 Human Development Index ................................................................................................................ 7 Humanitarian and vulnerability situation ........................................................................................... 7 Macro-economic overview ................................................................................................................... 11 Domestic resource flows....................................................................................................................... 12 Domestic revenues ........................................................................................................................... 12 Domestic expenditures ..................................................................................................................... 13 Sector spending ................................................................................................................................ 14 Health ................................................................................................................................................ 17 Agriculture ........................................................................................................................................ 19 International resource flows to Ethiopia .............................................................................................. 22 Sector funding ................................................................................................................................... 24 Education ...................................................................................................................................... 24 Health ............................................................................................................................................ 26 Agriculture .................................................................................................................................... 28 Summary of findings ............................................................................................................................. 29 References ............................................................................................................................................ 33 About us ................................................................................................................................................ 36

Ethiopia | 3

Overview
This paper aims to provide general, but comprehensive, background information on resources for poverty eradication in Ethiopia. It is part of a series of country analyses being undertaken by Development Initiatives (DI) researchers, initially for countries in Eastern Africa. Specifically, the paper documents and analyses the Government of Ethiopia’s (GoE) public expenditure in the education, health and agriculture sectors, and donor contributions to these sectors, between 2000 and 20101. A good understanding of resource flows to Ethiopia, and of allocations within the country, can provide useful evidence of what the Ethiopian Government has identified as the key priorities for poverty eradication and this would in turn inform policy actions and/or engagement. This paper is intended to be used by a wide range of stakeholders including public officials, particularly those involved in resource allocation (planning and tracking resources), civil society organisations (CSOs) engaged in and advocating for improved resource allocation, entities that seek accountability from their governments, as well as donor agencies. Furthermore, it can provide an evidence base for academics and researchers who wish to obtain a more detailed understanding of Ethiopia’s resource flows. The data used in this study was drawn primarily from statistical abstracts of the Central Statistical Agency of Ethiopia (CSA), the Ministry of Finance and Economic Development, the World Bank’s World Development Indicators and Africa Development Indicators, and the Organisation for Economic Co-operation and Development (OECD) Development Assistance Committee (DAC). Summary of findings Ethiopia is one of the fastest-growing economies in sub-Saharan Africa, with an average gross domestic product (GDP) growth rate of 8.2% between 2000 and 2011. This was significantly higher than the sub-Saharan average (4.7%) or the East Africa average2 (6.7%) over the same period. Growth is broadly based, with the industry and services sectors displaying the largest growth. In 2010/11 the proportion of people living below the national poverty line (NPL) was 29.6%, falling from 38.7% in 2004/5. During the same period, specifically in 2010, total public expenditure was US$6.0 billion, an increase of 2.8% from the US$3.2 billion which was spent in 2005. The largest proportion of the GoE’s total expenditure goes to education and training (25%). Prioritising spending on education has resulted in improved education indicators: for example, literacy rates increased from 37.9% in 2004 to 46.8% in 2011 (DFID, 2011). Ethiopia has not met the Abuja Declaration, 2001 target requiring African governments to spend at least 15% of their expenditure on health. However, the percentage of government expenditure in this sector, as a proportion of total national expenditure, has increased – from 8.5% in 2000 to 13.4% in 2010. It is plausible to attribute the improvements that have been seen in health indicators, such as the Human Development Index (HDI) which increased from 0.274 in 2000 to 0.363 in 2011, to these increases in health expenditure. However, public expenditure on health accounted for about 53% of total health expenditure (public, private and donor) in 2010, a decrease from 61% in 2005. This implies that the share public expenditure on health as a percentage of total health expenditure is decreasing, as the private and donor expenditure on health increases.

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The country analyses deliberately chose to focus attention on these key sectors. This covers the countries Uganda, Kenya, Tanzania, Rwanda, Burundi, South Sudan and Ethiopia

2 2.1 0.1 4.9 1. over half of total government expenditure.0 2.Ethiopia | 4 Agriculture.5 billion in official development assistance (ODA).3 2001 0.2 2007 Aid 3.6 5.0 0.5 4.8% in 2011.8 0. Agriculture’s share of GDP was 41.3 0.5 4.1 0.2 0.0 Expenditure (US$ billions) 0.1 2 2004 2.0 3.5 3. capital development and humanitarian aid.6 2000 0.5 2004 2005 Health 2006 1.3 2005 2.8% in 2010 and 2009 respectively.1 2008 2009 2010 Total revenue and grants Source: Development Initiatives based on OECD DAC data and World Development Indicators (WDI) data Figure 2: Summary of sector expenditure in Ethiopia. Despite this reduction in agricultural growth.8 3. donors contributed US$3.7 2007 Agriculture Education Source: Development Initiatives based on IFPRI Statistics of Public Expenditure for Economic Development (SPEED) .1 1. government expenditure on agriculture in 2007 was 14. 2012).6 0.9 0. 2002–2010 10 8 US$ billions 6 4 2 0 1. Figure 1: Summary of tax revenue and aid to Ethiopia.7 2006 2.2 3. the largest proportion of which was for humanitarian aid. The largest bilateral donor to Ethiopia is the United States.3 0.7 1. followed by social sectors such as education and health.2 2. 2000–2007 4.5 0. Between 2002 and 2010 the largest share of funding was spent on economic infrastructure (specifically transport and storage). In 2010.0 1.5 2.1 0.5 2002 2. Donor funding to Ethiopia makes an important contribution to budget support. which contributed US$875 million in 2010.4% of the total. a reduction from 47.8 2003 2.9 0. has seen its share diminish as the largest contributor of GDP to the service sector. though an important source of growth and contributor to poverty reduction (Africa Economic Outlook.5 2. surpassing the 10% benchmark of total government expenditure which it is expected would be devoted to agriculture as agreed in the Comprehensive African Agriculture Development Programme (CAADP) in 2003.0 0.5 0.4 2003 0.0 1.5 1.3 1.7% and 50.6 3.0 1.7 2002 0.3 0.

42% of the population in Ethiopia was below 15 years of age in 2010. and the rural population at 2.8 million (WDI.7%. In 2011. Women account for approximately 50% of the total population.9%. 45% and 49% respectively. making this the most populous country in Eastern Africa and the second most populous country in sub-Saharan Africa. 2010). 2007 * Southern Nations. During the same period. the population below the age of 15 in Kenya. Figure 4: Population in Ethiopia by region.2%. According to the African Statistical Yearbook (2012). 1994 and 2007 30 25 20 15 10 5 0 Millions 1994 2007 Source: Development Initiatives based on Population and Housing Census Report.6% of the population lived in urban areas. Nationalities and Peoples . Tanzania and Uganda was 44%. The urban population is growing at an annual rate of 4. 2000–2012 250 200 Uganda Tanzania Rwanda 100 50 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Development Initiatives based on World Development Indicators (WDI) data Millions 150 Kenya Ethiopia Burundi Some 80% of the population is located in the three biggest regional states: Oromia.Ethiopia | 5 Socio-economic analysis Population By 2010 the population of Ethiopia had reached 84. Figure 3: Population in Eastern African countries. approximately 17. The population is growing at the East African regional average rate of 2. Amhara and Southern Nations and Nationalities and Peoples (SNNP) region. after Nigeria. The lowest proportion of the population is in Harari regional state.

6% of the population suffer from multiple deprivations. as measured by the increase in the poverty gap squared.4 from 2.Ethiopia | 6 Poverty indicators The 2010/11 the Ethiopia Household Income and Consumption Expenditure (HICE) survey estimated the proportion of poor people in Ethiopia to be 29. Inequality. Over the same period.8% of the poverty line per capita. The MPI identifies multiple deprivations in the same household in education. The ‘poverty gap squared’. to eliminate poverty. The poverty gap may be interpreted as the cost per capita of eradicating poverty as a percentage of the poverty line. from 0.8%) and Tigray (31.367. Uganda. falling significantly from 38. The most recent data available for the country’s MPI estimate is the 2005 DHS. This reduction in poverty occurred in both rural and urban areas.3 to 0. This means that poor people were worse off in 2010/11 than they were in 2004/5. there has been an increase in the severity of poverty. poverty is highest in Afar (36.1% in 2010/11. declined slightly between 2004/5 and 2010/11. estimated by means of the Gini coefficient.562 in 2005 (Demographic and Health Survey (DHS)).678 in 2000 to 0. By comparison. inequality among poor people. while 6. 1995–2010 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% National Rural Urban Poverty headcount 1995 46% 48% 33% 2000 44% 45% 37% 2005 39% 39% 35% 2010 34% 35% 28% Source: Development Initiatives based on International Monetary Fund (IMF) data Multidimensional Poverty Index Ethiopia’s Multidimensional Poverty Index (MPI) has improved from 0. 2010). followed by Addis Ababa (28. health and people’s standards of living. while it is lowest in Harari (11.298. followed by Somali (32. A recent report revealed that investments in improving nutrition and access to safe water have helped to reduce Ethiopia’s MPI (Alkire et al.7% in 2004/5. Kenya and Rwanda have MPIs of 0. Figure 5: Ethiopia – percentage poverty headcount. . The poverty index therefore implies that.8%).6%. indicating a substantial reduction in the intensity of poverty.0%). a measure of the severity of poverty.7% in 2004/5 to 3.0%). takes into account. According to this data.. the GoE would need to invest 7. Despite the reduction in headcount poverty and the poverty gap.1%). in addition to the poverty gap. This implies that the poor people in Ethiopia are vulnerable to further poverty if poverty eradication resources and programmes do not specifically target and reach the chronically poor.3% in 2004/5 to 7. the poverty gap index3 fell from 8. 3 4 The ‘poverty gap’ refers to how far households are from the poverty line. 88.8% in 2010/11.1% are vulnerable to multiple deprivations. Regionally.

In urban areas.000 internal displacement people. . added to chronic poverty.247. and urban development programmes such as development of micro and small scale enterprise development. 2011). At the same time. Sudan and South Sudan. The most affected were the South and SouthEastern parts of the country. and will asylum seekers from Eritrea. Ethiopia has one of the lowest HDI values in East Africa. which is not so impressive over a 10 year period.Ethiopia | 7 0. from 57. like all average estimates. HDI masks inequalities in the distribution of human development across the population. Despite the low MPI.000 to 350.3 years in 2011. Rates of stunting also fell. 2012). to 0. When adjusted for inequality. The percentage of the population with access to improved water increased from 29. from 51. conflicts.7 years in 2000 to 59. Ethiopia suffered two consecutive failed rainy seasons in October-December 2010 and March-May 2011 in which pastoral communities lost a large number of cattle. It may also suggest that social services that improve living standards are more available to the poor in other countries of Eastern Africa compared to Ethiopia. under-five mortality improved from 141 deaths per 1. This is because. Table 1 below provides a summary of the poverty indicators in Eastern Africa in 2011.4% in 2000 to 44.229 and 0. thereby increasing the vulnerability of the population at risk. global economic shocks and forest fires.. In 2010. its HDI value falls even lower.0% in 2011. food security programmes. Ethiopia is suffering with an estimated 300. Life expectancy has steadily increased.0% in 2010 Human Development Index Ethiopia’s Human Development Index (HDI) has made a slow improvement over the past 10 years. Ethiopia is struggling with an influx of thousands of refugees from conflict inflicted Somalia.463 (see table 1 for comparisons with other Eastern Africa countries). infrastructural development. Ethiopia is also vulnerable to disease outbreaks. the achievement in poverty reduction as seen by the improvement in poverty indicators can be attributed to broad and multi-faceted programmes implemented in both rural and urban areas such as intensification of agriculture. social protection programmes have been more accessible and effective in their objective of poverty eradication (Lwanga et al.426 respectively. Ethiopia’s HDI value was 0.363 (an improvement from 0. These periodic shocks. ranking it 174 out of 187 countries. Humanitarian and vulnerability situation Ethiopia is highly prone to recurrent droughts and floods.0% in 2000 to 44. reliance on rain-fed agriculture. aggravated by clan clashes over scarce resources and floods (European Commission – Humanitarian Aid and Civil Protection (ECHO). placing it well below the subSaharan average of 0. This is further exacerbated by structural under-development in disaster-prone areas. In 2011. flooding affected close to 1 million people in several regions (UNICEF.000 live births in 2000 to 106 in 2010. The various impacts of climate change negatively impact economic growth and reduce the benefits of development gains. 2010). According to HICE (2010).274 in 2000). This suggests that the poor people in Ethiopia suffer from a larger number of depravations compared to other poor people in Eastern Africa. which are becoming more frequent and severe. and gross national income (GNI) (PPP US$) per capita increased from US$541 to US$971 between 2000 and 2011. poor hygiene and sanitation increase vulnerability during humanitarian crises. This situation resulted in conflicts over resources (water and pastures).

following the food crisis (see Figure 6). around 7. climate change. together with other donors implemented a response targeting chronic food insecurity in rural Ethiopia.Ethiopia | 8 The recurrent and almost predictable shocks (linked with periodic/fairly predictable drought cycles) and result in under nutrition and food insecurity are a challenge to both the population and government. The GOE. the US gave US$254 million followed by the United Kingdom (US$85 million). The amount of aid to disaster preparedness is low at an average of US$8 million between 2008 and 2011. close to 10% of the population in Ethiopia is chronically vulnerable to food insecurity and dependent on national safety-net programmes. 2006 . 2011).2011 900 Humanitarian aid. Emergency food aid thereafter decreased. Transfers. thereby cutting back on annual appeals for assistance and impromptu food distributions. The United States (US) is the largest humanitarian aid donor to Ethiopia. The Productive Safety Nets Programme (PSNP) is an intervention aimed at providing transfers to the food insecure population in chronically food insecure districts in a way that prevents asset depletion at the household level and creates assets at the community level. economic stability. The amount of emergency food aid to Ethiopia rose sharply in 2008.8 million chronically food insecure households in Ethiopia . The GoE in 2005. It is therefore critical that the resilience of the vulnerable population is built to improve their response to shocks (increase their coping strategies) and increase their preparedness for future shocks. In 2011. through safety nets are transferred to the poor through public works and direct support. emergency relief and food aid in response to shocks came solely from donors through annual appeals. and social protection would potentially reduce vulnerability and make development gains more sustainable. Before 2005. but is still high. and then by Germany (US$ 27 million). Mechanisms including policies on disaster risk reduction. US$ Millions 800 700 600 500 400 300 200 100 0 2006 2007 2008 2009 2010 2011 Disaster prevention and preparedness Reconstruction relief and rehabilitation Relief co-ordination Emergency food aid Emergency/distress relief Source: Development Initiatives based on OEDC DAC CRS data According to the United Nations (UN) Office for the Coordination of Humanitarian Affairs (OCHA) (2012). Figure 6: Humanitarian aid to Ethiopia. According to UN OCHA (2012). Ethiopia received US$360 million food aid. Several million people require emergency assistance annually to meet their basic needs. following the 2002/2003 drought when over 13 million Ethiopians required assistance established a new coalition for food security and sought a new approach to tackling food insecurity (World Bank. In 2011.

as well as decentralisation. broad-based and equitable economic growth. while building on the previous strategies. expanded education. and this is now being implemented and directed towards achieving the Millennium Development Goals (MDGs). strengthened health service provision. which provides a minimum of six months’ worth of cash or food transfers to participating households. (HDR. In 2010. education and agriculture. which built on the development strategies of the SDPRP but included policies to make improvements in the diversification and commercialisation of agriculture. the Growth and Transformation Plan (GTP) 2010/11–2014/15 was approved. rural development. food security and capacity building. 2011). .Ethiopia | 9 are enrolled in the PSNP. The GOE has also embarked on the implementation of economic reform programmes that have aimed to reorient the economy and which have focused specifically on poverty reduction. This strategy was succeeded in 2005 by the Plan for Accelerated and Sustained Development to End Poverty (PASDEP) 2005/06–2009/10. In 2002 the Ethiopia Sustainable Development Poverty Reduction Strategy (SDPRP) 2002/03–2004/05 was adopted. there has been a resultant improvement in poverty indicators. The overriding strategy of the GTP is to sustain rapid. With more than 60% of total GoE expenditure directed towards poverty-oriented sectors such as health. which targeted infrastructure.

124 1.9 – 38.9 87.53 – 0.5 66.3 54.229 0.8 61.6 – Kenya Tanzania Uganda Rwanda Burundi South Sudan Ethiopia SubSaharan Africa World 57. 2011 * 2009 indicators ** 2010 indicators # WDI modelled estimates .01 72.9 – 0.8 58 210 # – 80.4 50.8 44.2 72.133 368 984** (value) (rank) (value) (% of population in multidimensional poverty) 47.2 84.2 54.90 73.57 27* 29.4 35. 2011 Country/ region Life expectancy at birth (years) Underfive mortality rate (per 1.3 – 39.1 – 50.Table 1: Poverty indicators in East Africa.367 0.20 70.4 38.1 971 1.054* 350 500 # # 44 61.7 63.9 33.3 80.1 58.0* 59.463 143 152 161 166 185 – 174 – 0.966 69. 2011 and World Development Indicators (WDI) data.509 0.363 0.367 0.4 42.7 42.5 – 88.0 – (NPL (%)) HDI MPI (per 100.56 – 2.6 59 53 53.9 88.328 1.426 0.6 65 72 45.9 28.000 live births)** 488* 450 98.466 0.8 81.8 65.429 0.4 24.316 – 0.682 – – – Sources: Development Initiatives based on Human Development Report (HDR).5 58.7 76.7 67.082 – – 0.4 10.25 a day) 19.000 live births)* 84 108 128 111 166 102* 104 129 Maternal mortality Proportion of stunted children (% of population)* Adult literacy rate (% 15+)** Access to improved water (% of population)** GNI per capita Population below the national poverty line (NPL) (PPP US$1.446 0.9 340 800 # # (constant 2005 PPP US$) 1.1 55.492 1.67 66.7 51.

Macro-economic overview Ethiopia is one of the fastest-growing non-oil-producing economies in Africa (African Economic Outlook. Growth in the industrial sector in 2011 was driven by rapid expansion in mining (and manufacturing to a lesser extent). This may imply that GDP growth may not necessarily result in per capita growth.6% and the sub-Saharan average of 4. 2010). growth in Ethiopia is now broad-based.0 0. Figure 7: Real GDP growth (%). Its economy grew rapidly from a growth rate of -2. 2011).0 4.0 -4. with increasing contributions to GDP from the service sector (38%) and industry. In 2011 mining grew by an unprecedented 48%.6% contribution to GDP in 2006 to 1. that is. although it sustained double-digit GDP growth in almost all of those years (Country Strategy Paper (CSP).6% in 2004. in particular construction and manufacturing (14.0 6. Between 2004 and 2011 Ethiopia’s average growth rate was 10.0 12. 2000–2011 16.0 -6.7% in 2011.0 14.3%) (CSP. 2012). which constituted about 47% of its GDP in 2010 (see Figure 8).0 -2.0 Source: Development Initiatives based on WDI data Ethiopia Sub-Saharan Africa (all income levels) East Africa GDP per capita growth (annual %) Ethiopia is highly dependent on agriculture.9% in 2010.2% in 2003 to a high of 13.0 8. close to half the national average growth between 2000 and 2011. Per capita GDP growth has been decreasing following the same trends as the GDP growth.0 10. reflecting the impact of investment in the expansion of mining activities and .6%.6%. and economic growth does not necessarily result in poverty reduction at a household level. and above both the East African average of 7.0 2. GDP annual growth per capita is low at 5. 2010). Subsequently it fell gradually to 9. significantly above the estimated growth rate of 7% required to achieve the MDG of halving poverty by 2015. from 0.6%. and among the top-performing countries in sub-Saharan Africa African Development Bank (AFDB. Although initially led by agriculture.

Revenue from grants has been increasing faster than the increase in tax revenue in Ethiopia.8 47.0 billion.0 Source: Development Initiatives based on World Development Indicators Domestic resource flows Domestic revenues Ethiopia’s three main sources of revenue are tax revenue.Ethiopia | 12 exports.5 14. 1990–2010 100 80 Percentage 60 40 20 0 1990 Agriculture 2000 Services 2009 Industry 2010 54.3 49. up from US$234.7 11. 2010)). Figure 8: Sector contribution to GDP. 2000–2011 6 5 US$ billions 4 3 2 1 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Grants Non-tax revenue Tax revenue Source: Development Initiatives based on Ministry of Finance and Economic Development (MOFED) data . In the financial year 2010/11. Tax revenue is composed of direct tax.2 billion in 2000.1 34.5 12. 2012). non-tax revenue and grants.8 10. Figure 9: Government of Ethiopia revenues. In 2010/11. grants amounted to US$1.0 million in 2000. 2010). tax and non-tax revenue has been increasing in Ethiopia since 2000.3 38. especially gold (African Economic Outlook.4 37. According to Figure 9 below. However between 2010 and 2011 there was an overall decrease. However. indirect tax and foreign trade tax.8 38. while grants accounted for the remaining 19% (MOFED. agriculture still accounts for the largest share of employment (80%) and remains a key source of growth. The GoE earned total tax and non-tax revenues of US$4. domestic revenue (tax and non-tax revenue) accounted for 81% of total revenues. 2012). This means therefore that the increase in total revenue in Ethiopia has mainly been contributed to by the increase in grants (and international aid (AFDB.9 50. an increase from US$1.9 billion in 2011. Growth in the construction sector has been stimulated by increased public expenditure on infrastructure (MOFED.

tax revenue in Ethiopia contributed 11.6 billion in 2000. Domestic expenditures Total government expenditure in Ethiopia was US$5. with plans to achieve a contribution of 15% by the end of 2015 (MOFED. an increase from US$2. % of GDP 2000–2009 for Ethiopia. water supply. . according to African Economic Outlook (2012). Kenya’s contribution of revenue to GDP was 20.1% is lower than the sub-Saharan average of approximately 23%. agriculture. Uganda and sub-Saharan Africa 30 Revenue. The GTP intends to increase budgetary allocation to social sectors such as health. Government revenue as a proportion of GDP has been decreasing since 2003 according to Figure 10. excluding grants (% of GDP) 25 20 15 10 5 0 Sub-Saharan Africa Ethiopia Kenya Uganda 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Development Initiatives based on WDI data Ethiopia’s contribution of revenue to GDP of 12. In 2010/11 capital expenditure5 accounted for 56% of total government expenditure. 2012). while recurrent expenditure increased by 28%.6 Between 2009/10 and 2010/11.3% to GDP and. Figure 10: Government revenue.3%. In 2010. In total. The GoE in its Growth and Transformation Plan 2010/11–2014/15 has committed to allocating more resources to build economic and social infrastructure and to ensure the provision of basic services aimed at eradicating poverty and achieving rapid economic development.4%. Kenya. to generate a good or service. The improvement in tax revenue is due to improvements in tax administration.6 billion in 2011.3%. while the remaining 44% was recurrent expenditure. Recurrent expenditure is spending on items that are consumed and last only for a limited period of time.Ethiopia | 13 The GoE is committed to achieving an average tax revenue contribution to GDP of 13. 2012). This improvement in revenue mobilisation (together with an increase in aid) has enabled the GoE to increase investments in infrastructure that stimulate economic growth (MOFED.8% in 2013. while Uganda’s was 12. tax revenue and grants contributed 18% of GDP on average between 2000 and 2011. is projected to contribute 11. In 2011. education. capital expenditure increased by 33%. whilst it has been increasing in Kenya and Uganda. 5 6 Capital expenditure is spending on assets that will be used over a long period of time. excluding grants.

Public debt. In totality.0 1.5 3. the largest share of government expenditure did not go to social sectors that support poverty eradication. Figure 11: Capital and recurrent government expenditure.0 4.0 2000 2001 2002 2003 2004 2005 2006 2007 Source: Development Initiatives based on MOFED and IFPRI Statistics of Public Expenditure for Economic Development (SPEED) 25. .5 Total expendiure Ethiopia Ethiopia public expenditure (% of GDP) Kenya public expenditure (% of GDP) Uganda pblic expenditure (% of GDP) 2.0 3. The highest level of expenditure was on education (specifically primary education) and training (about 30%).Ethiopia | 14 food security and infrastructure.0 1.0 5. 2000–2007 30.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Capital expenditure Recurrent expenditure Source: Development Initiatives based on MOFED Figure 12: Total government expenditure and government expenditure as a proportion of GDP. followed by national defence and agriculture.0 2.5 0.5 2. public order and security and general services also received a large share of government expenditure within the same period.0 0.0 15. while attempting to contain increases in recurrent expenditure (MOFED. according to figure 13.0 0.0 US$ Billions 4.0 Public expenditure (% of GDP) Ethiopia total expenditure. in the form of capital expenditure.0 3. 2000–2011 7.5 1.0 10.0 Sector spending Figure 13 shows government recurrent expenditure in various sectors in the period 2006–10.0 20. to support poverty eradication. (US$ billions) 4.0 6.0 5. 2012).0 0.0 5.

and has an education policy that is committed to improving access to quality basic education for all children and adults. (4) to prevent HIV/AIDS. while the rest of Ethiopia (Addis Ababa in particular) education expenditure has been cut back. education accounted for 4. Recurring expenditure is lowest in Oromiya and Afar (20%) and highest in Dire Dawa at 60%. (4) adult education. only Oromiya and Afar are the only two areas showing an increase in overall recurring expenditure in education. education and ensure equity. Total expenditure on the sector rose from US$500 million in 2004 to US$1. as well as through alternative routes to education such as basic education centres and non-formal and adult education (DFID.Ethiopia | 15 Figure 13: Recurrent government expenditure. with particular emphasis on females. 2011). and participation in. and (5) to increase participation of stakeholders.7% of GDP. over 25% of public expenditure was allocated to education. In 2010/11. Ethiopia’s Education Sector Development Programme IV builds on the objectives of the previous Education Development Plan: (1) to increase access to. (3) to reduce inefficiency in education. with specific attention to functional adult literacy. Therefore. The core priorities of the education system are: (1) quality and internal efficiency – ensuring student completion and achievement. (3) equity in access – reaching the marginalised and unreached. The GoE has consistently increased its spending on education since 2004. and (5) improving management capacities. However. (2) a stronger focus on sciences and technology.3 billion in 2010.6% in 2002. Indeed. up from 3. 2006–2010 2006 4000 3500 3000 2500 2000 1500 1000 500 0 2007 2008 2009 2010 Source: Development Initiatives based on MOFED data Education The GoE is committed to achieving education for all by 2015. an increase from 19% in 2004. (2) to ensure the quality and relevance of education and training. By 2010/11. although spending is still US$ Millions . the education sector in Ethiopia has undergone impressive expansion in recent years through the growth of both formal and informal schools for primary and secondary education.

equity. Figure 14: Public expenditure on education. working towards achieving the Education For All (EFA) goals as defined in the EFA Dakar Framework (2000). quality and relevance in education and it focuses on expanding access to educational opportunities.2 1. Box 1: Education Policy in Ethiopia The GoE developed the Education Training Policy (ETP) and Education Sector Strategy in 1994. Urban literacy rates were twice as high as in rural areas (78. In addition to addressing the formal education system.0% in urban areas and 38.8%) followed by Dire Dawa and Harari regions at 75. such as primary school enrolment and literacy and numeracy rates. up from 37. The ETP’s goals.4 0. The concept of NFE provides a second chance for all. which is in line with the government’s commitment to increase access to quality basic education. functional literacy and continuing education. this difference is likely due to accessibility of schools between urban and rural areas.5% in rural areas). The literacy rate is highest in Addis Ababa (93.0 0. government spending in education in these areas has increased. the ESDP includes non-formal education (NFE) opportunities for drop-outs and out-of-school children and young people.9% in 2004. and a significant reduction in drop-out rates.8% in 2011.4 1. According to the 2011 Ethiopian Welfare Monitoring Survey.2 0. The largest proportion of capital expenditure for education was allocated to technical and vocational training (46%). 2004–2010 Total government expenditure on Education (US$ millions) % expenditure in education (% of total budget) 1. According to the Welfare Monitoring Survey report. Ethiopia has shown an improvement in education sector indicators.8 0.Ethiopia | 16 low in the poorer regions of Ethiopia. This educational reform aims to achieve universal primary enrolment by 2015. The lowest literacy .9% and 71. literacy rates were 46.2% respectively.0 Total expenditure on education (US$) Billions 30 25 20 15 10 5 0 % education of total budget Source: Development Initiatives based on Ethiopia Ministry of Education and WDI data The largest proportion of spending allocated to the education sector from recurrent expenditure was on primary education (62%).6 0. strategies and programmes address problems of access. The government adopted the Education Sector Development Programme (ESDP) in 1997. through distance education.

while 10% of children are wasted (low weight-for-height) (DHS. 2007). 2011).7% at primary level and 20. assurance of accessibility of health care for all segments of the population.8%). particularly on interventions geared to improving maternal and child health and combating malaria. HIV and TB.000 live births in 2005.000 live births (67% of which occur before the age of one). and is aligned to the health-related MDGs. school drop-out rates were 4. The major areas of focus of the health policy are democratisation and decentralisation of the health-care system. The health service delivery system is decentralised. to reach all segments of the population (HEP. This recognition has led to increased investments in the health sector. and in 1997 a comprehensive rolling 20-year Health Sector Development Plan (HSDP) was formulated. Box 2: Ethiopia National Health Policy Following the change of government in 1991. The Ministry of Health launched the HEP in 2003. The HSDP focuses on a comprehensive health service delivery system to address mainly: 1) communicable diseases. down from 123 deaths per 1. promotional and curative components of health care. Ethiopia has demonstrated strong progress in the health sector. through its Sustainable Development Poverty Reduction Plan (SDPRP) (2002/03–2004/05) and Plan for Accelerated and Sustained Development to End Poverty (PASDEP) (2005/06–2009/10). The Health Sector Development Plan IV (2010/11–2014/15) builds on previous HSDPs. up from 55 years in 2005. This is focused on providing quality promotional. A core component of the PASDEP is the Health Sector Development Plan (HSDP).9% at secondary level in 2011. with responsibility for implementation being largely devolved to districts. 2012). with higher literacy rates recorded for males (56.Ethiopia | 17 rate was recorded in Somali region (30. This implies that expenditure in education is not equal across regions and much of the expenditure goes to easy-toreach regions. a new National Health Policy was introduced in 1993. which plan on the basis of block funding for the sector. and 3) improving maternal and child health.7 Nationally. under-five child mortality is currently 88 deaths per 1. preventive and selected curative health-care services in an accessible and equitable manner. development of the preventive. Approximately 44% of children under five years old are stunted (low height-for-age). 7 Gross enrolment was 90. . Life expectancy in Ethiopia is 58 years.4% at primary level and 3. 2011. according to the Ethiopia Demographic and Health Survey (DHS) report. The welfare survey results show that net school enrolment was 62% for primary education and 11% for secondary education. Health The GoE. The investment has resulted in significant improvements in some health sector indicators. which focuses on strengthening Ethiopia’s health system. particularly through the flagship Health Extension Programme (HEP) (Africa Economic Outlook.3% at secondary level. 2) malnutrition. There was a significant discrepancy between sexes.3%) than for females (37. For example.5%) – the countries’ poorest regions. has recognised the critical role that improved health plays in economic development. and the promotion of private sector and NGO participation in the health sector.

10 in 2007/08.Ethiopia | 18 In 2007/08 the GoE spent US$1. with a 2010 allocation to health of 20% of its national budget.2 0 1999/2000 2004/05 2007/08 4% 4. In 2007/08 per capita expenditure on health was above the US$12 target of the HSDP. an increase from 9% in 2004. Per capita government expenditure on health was US$5. is the only country in East Africa that has met the Abuja commitment.8 0. compared with 25% allocated to the prevention of communicable diseases and for maternal and child health.2 1 0.60 in 1999/2000. Figure 15: Public expenditure on health. under which governments committed to spending at least 15% of their national budgets on health. an increase from US$4 million in 1999/2000. Rwanda. which nearly tripled to US$16. Its expenditure on health is below the Abuja Declaration pledge of 2001.8 Both total health expenditure and expenditure per capita more than doubled in accordance with the government’s commitment to doubling health expenditure in the HSDP III. In 2007/08. curative care received the bulk (46%) of total health expenditure. 1999/2000–2007/2008 1.4 14% 12% 10% 8% 12% 10% 8% 6% 5% 0. Total expenditure on health accounted for 5% of GDP in 2004/5. 8 Ethiopia’s Fourth National Health Accounts.5% of GDP in 2007/8.50% 4% 2% 0% Total Health Expenditure (% of GDP) Government health expenditure US$ billion 1. 2007/08.6 Government health expenditure (billion) Total health expenditure (% of GDP) Health expenditure (% of total expenditure) Source: Development Initiatives based on World Development Indicators and Ethiopia National Health Accounts The GoE invested approximately 13% of its total expenditure in the health sector in 2010. decreasing slightly to 4. .4 0.2 billion on health.

a clinic for 27. It accounts for approximately 80% of employment. . low-output rain-fed systems. clinics and health centres are available within a 5 Kilometre radius for 87. made up of low-input. largely as a result of infectious diseases and nutritional deficiencies.5% of households.2% of the population. Despite the improvement in health indicators in the country over the years the GoE needs to increase its investment in rural areas in order to improve availability of and access to health for the rural communities to improve rural health indicators.Ethiopia | 19 Figure 16: East Africa – % total government expenditure allocated to health.4% of the rural population have to travel at least 10 kilometres to reach the nearest health post. 2001–2010 % government expenditure on health 25 2001 2002 20 15 10 5 0 Ethiopia Kenya Rwanda Tanzania Uganda Burundi Abuja 2003 2004 2005 2006 2007 2008 2009 2010 Source: Development Initiatives based on SPEED data Despite these improvements.8% of households. 50.3% of households. while hospitals are available within a 5 kilometre radius for only 1. a health post is available within a 5 kilometre radius for 62.6% of households. there are significant urban-rural disparities in the distribution of health facilities. For rural dwellers. Widespread poverty. Agriculture The agriculture sector remains one of the most important contributors to economic development in Ethiopia.4% of households. inadequate access to clean water and sanitation facilities and poor access to health services have contributed to the high burden of ill-health in the country.9 According to the 2011 welfare monitoring survey. with over 74% of the total female population and 83% of the total male population employed in the sector (WDI). 9 Health Sector Strategic Plan (HSDP) IV 2010/11–2014/15. In urban areas.7% of households and hospitals for 49. health centres for 24. Ethiopia still has a poor health status compared with other Eastern Africa countries. a health post is available within a distance of 5 kilometres for 88. low education levels (especially among women). Agriculture in Ethiopia consists mainly of subsistence farming. along with low incomes.

In 2003.4% in 2011.9% in 2003 to 16.Ethiopia | 20 Droughts periodically reverse performance gains in the agricultural sector. African governments at the Africa Union Summit in Maputo. to poor land management practices and that have led to severe land degradation. and in particular MDG 1). and committed to increasing spending in agriculture to at least 10% of total budgetary resources. Mozambique. In 2003 the Comprehensive African Agriculture Development Programme (CAADP) was adopted. Agriculture accounts for about 90% of Ethiopia’s exports. limited access by smallholder farmers to agricultural inputs. specifically industry and services. 2003. The sector’s annual growth rate improved from -1. since 2004 growth in agriculture has been above the CAADP target of 6% per annum. with devastating effects on household food security and poverty levels. which set the achievement of 6% annual agricultural growth as its main goal. irrigation and agricultural markets and. Nevertheless. . more importantly. which was agreed in the Maputo Declaration.10 Agriculture’s share of GDP has fluctuated over the years.8% in 2002 and -10.11 Figure 17: Agriculture % annual growth rate and % share of GDP 4 18 16 Agriculture expenditure (US$ billions) 14 12 10 8 6 4 2 0 2000 2001 2002 2003 2004 2005 2006 2007 0 Percentage Agriculture expenditure (US$) billions Agriculture expenditure (% of GDP) Agriculture expenditure (% of total expenditure) 2 Source: Development Initiatives based on SPEED data 10 11 Ethiopia’s Agriculture Sector Policy and Investment Framework (PIF) 2010–2020.9% in 2004. The most recent decrease was a drastic decline from 50.8% in 2009 to 41. committed to prioritising agriculture in terms of economic growth and poverty reduction (especially towards attaining the MDGs. Reduction in the agriculture’s share of GDP may be due to growth in other sectors. improved production technologies. Low agricultural productivity can be attributed to recurrent droughts. after which it steadily declined to 6. financial services.9% in 2011.

processing and marketing. . Box 3: Agriculture Sector Policy and Investment Framework (PIF) 2010/11 –2019/20 The PIF provides a strategic framework for the prioritisation and planning of investments that will drive Ethiopia’s agricultural growth and development.0 14.0 10. 3.0 0.4% and 4. This objective embodies the concepts of increasing production. The PIF has four main strategic objectives: 1.0 Agriculture expenditure (% of total expenditure) 16.0 Ethiopia Source: Development Initiatives based on SPEED data 2000 2001 CAADP Benchmark 2002 2003 2004 2005 2006 2007 Kenya Uganda In 2009 the GoE signed the Comprehensive Africa Agriculture Development Programme (CAADP) compact. for example. To achieve a sustainable increase in agricultural productivity and production. 2000–2007 18. the national vision of becoming a middle-income country by 2025 and the Five-Year Growth and Transformation Plan. Ethiopia allocated 14. and protecting the vulnerable. 4. conserving the environment.0 12. To achieve universal food security and protect vulnerable households from natural disasters.Ethiopia | 21 Figure 18: Agriculture expenditures and the 10% CAADP target.0 4. To reduce degradation and improve productivity of natural resources. committing to spend at least 10% of its budget on agriculture.0 6. To accelerate agricultural commercialisation and agro-industrial development. PIF is designed to operationalise the CAADP Compact signed by the GoE and its development partners in September 2009.0 8. The development objective of the PIF is to “sustainably increase rural incomes and national food security” .1% of its total expenditure to agriculture in 2007. and aligned with. In comparison with its neighbours Kenya and Uganda. 2. It is anchored to.0 2. eliminating hunger.0% respectively in the same year. while Kenya and Uganda allocated only 3. and at the moment it is the only East African country that is on track to meet its commitment.

5 0. Ethiopia receives the largest percentage (7%) of total ODA from all donors.0 Ethiopia Burundi Rwanda Somalia Tanzania Uganda Kenya Source: Development Initiatives based on OECD DAC data.5 1.5 billion in 2010 and is concentrated on core social sectors and infrastructure. and in particular sub-Saharan Africa. This was also partly in the context of the MDGs. Ethiopia was at war with Eritrea.Ethiopia | 22 International resource flows to Ethiopia Africa. After peace was restored in 2000. 2007). followed by Tanzania (6%). donors began a slow return to Ethiopia and aid to the country steadily increased from 2001. The SDPRP was an economic reform policy aimed at transforming the Ethiopian economy from being command-focused to marketoriented. aid to Ethiopia increased from US$1.0 3. net disbursements.5 4.5 2.0 0.1 billion in 1995 to US$3. Burundi and Somalia receive less than 1% of total aid.0 1. increases in aid in 2001 came mainly as a result of the issuance of the Ethiopia Sustainable Development Poverty Reduction Programme (SDPRP) 2001/02. Between 1998 and 2000. and as the donors belatedly recognised that Ethiopia’s development status justified higher levels of assistance than in the past. and bilateral donors largely withdrew aid. with several bilateral choosing Ethiopia as a country of focus (Furtado and Smith. Within East Africa. . 1995–2010 4. Figure 19: ODA to East African countries. receives a greater share of global aid than any other region in the world with East Africa receiving approximately 25% of all ODA to sub-Saharan Africa. constant 2010 prices According to OECD DAC statistics.5 US$ billions 3.0 2. with greater emphasis on economic growth and poverty reduction. According to Alemu (2009).

2006–2010 (US$ millions) Rank 1 2 3 4 5 6 7 8 9 10 US UK Italy Japan Germany Ireland Netherlands Canada Norway Sweden 2006 315.5 47. Its development objectives are: 1.5 93.9 145.8 86. 2.7 167.7 105.7 36.8 44. Increased utilisation of quality health services.8 54. Box 4: USAID in Ethiopia The US government supports the Government of Ethiopia through the USAID/Ethiopia Country Development Cooperation Strategy (CDCS).0 65.2 97.5 82.8 50.6 Source: Development Initiatives based on OECD DAC Creditor Reporting System (CRS) data Between 2006 and 2010.5 54.2 44.7 291.6 98.6 49.9 60.8 56.Ethiopia | 23 Table 2: Top 10 aid donors to Ethiopia.5 39. Improved learning outcomes.8 US UK Japan Canada Netherlands Spain Germany Italy Ireland Sweden 2009 726.1 42. the US gave around US$875 million.1 46.8 46.1 140.1 US UK Canada Netherlands Germany Ireland Italy Spain Japan Sweden 2008 811. The strategy’s overall goal is “Ethiopia’s transformation to a prosperous and resilient country accelerated”.0 52.4 96.2 48.3 70.4 32. of which 53% (US$462 million) was in humanitarian aid. the US was the largest bilateral donor to Ethiopia.0 34. Increased economic growth with resiliency in rural Ethiopia.6 40.2 75.9 84. In 2010 alone.2 US UK Germany Canada Italy Ireland Netherlands Sweden Japan Norway 2007 371.1 96.8 39.6 113.4 407.2 50.9 54.0 343.1 79.8 85. . 3.6 US UK Canada Germany Japan Netherlands Ireland Spain Sweden Norway 2010 875.4 57.4 191. whose goal is aligned to Ethiopia’s Growth and Transformation Plan (2010/11–2015/16).

4m. US$6. 2006–2010 Humanitarian aid. productive sectors and humanitarian relief. specifically to education facilities and training. 9% Social infrastructure and services. 2006–2010 Multisector/crosscutting.0m. which received 49.6m. The remainder is divided between economic infrastructure and services. US$0. US$ million Education The education sector received approximately 20% of aid to Ethiopia between 2006 and 2010. 21% Source: Development Initiatives based on OECD DAC CRS data. The largest sub-sector was education policy and administration management. US$4. 54% Source: Development Initiatives based on OECD DAC CRS data Figure 21: Sector-allocable aid to Ethiopia.5m. 8% Total sectorallocable.2m. US$10. 13% Production sectors.9m. US$2. 25% Commodity aid/general programme assistance.9% of aid over the period.4m. reproductive health and basic health care. population. US$1. The second largest sub-sector was basic education (36%).9m. thereby contributing to the improvement in availability and access to and availability of these social services. US$2. US$1. Figure 20: ODA breakdown by type of aid to Ethiopia.Ethiopia | 24 Sector funding Aid to Ethiopia is mainly concentrated in social sectors such as education. 13% Actions relating to debt. Donor funding to the education sector is aligned to government priorities . 57% Economic infrasturcture and services.

16% United Kingdom. 2006–2010 Post-secondary education US$107m. 4% Germany. US$72m. Figure 23: Top aid donors to the education sector. Figure 22: Aid to education sub-sectors. Other top donors include the Netherlands. which has contributed to the improvement of education indicators in Ethiopia. 5% Basic education US$421m. 36% Education policy & admin management US$577m. US$ millions .Ethiopia | 25 of increasing education access for all. 50% Source: Development Initiatives based on OECD DAC CRS data. 6% Netherlands. 7% Source: Development Initiatives based on OECD DAC CRS data. giving 62% (or US$165 million) between 2006 and 2010. 62% Italy. 9% Secondary education US$52m. US$ millions The UK is the largest donor to the education sector. US$60m. US$38m. the US and Italy. US$673m. 2006–2010 Others. Germany. US$57m. 5% United States. US$176m.

1 billion between 2006 and 2010. US$91m. Canada was the largest donor to the health sector (26%). US$37m. enabling millions of people to go to school. US$68m.  Ensuring better access to basic services. US$ millions . DFID’s top priority areas are:  Agriculture and food security  Governance and security  Health  Education  Climate change. Health Approximately 18% of total aid to Ethiopia goes to the health sector – accounting for US$1. 20% Others. Figure 24: Top aid donors to the health sector. External funding to the sector accounted for approximately 39% of total health expenditure in 2010. US$84m. 26% United Kingdom. 6% Spain. 15% Source: Development Initiatives based on OECD DAC CRS data. US$120m. US$28m.Ethiopia | 26 Box 5: UK Department for International Development (DFID) in Ethiopia DFID works to protect the most vulnerable people in Ethiopia by: 1) Building the resilience of the very poorest by reducing food insecurity and improving livelihoods and security in fragile and/or conflict-affected areas. Between 2006 and 2010. peace and security and tackling the effects of climate change. followed by the UK and the US. 2006–2010 Canada. drink clean water and access basic health care. 19% Italy. US$28m. Top priorities  Addressing the underlying causes of poverty and fragility through new support for wealth creation. 8% United States. extend and improve proven programmes to expand access to quality basic services. 2) Consolidating recent gains and helping to achieve the MDGs by continuing to support. 6% Ireland.

New players are emerging in health sector funding that are bringing significant changes to the traditional aid architecture. President’s Emergency Plan for AIDS Relief (PEPFAR) and the GAVI Alliance (formerly the Global Alliance for Vaccines and Immunisation) (Alemu.S. the U. (ii) the mobilization of significant additional resources to the sector. which received 10% and 8% of total health aid respectively. which received 28% of health aid.Ethiopia | 27 Figure 25: Aid to health sub-sectors 2006–2010 Tuberculosis control 4% Malaria control 28% Basic health care 39% Basic health infrastructure 1% General Health Total 10% Infectious disease control 10% Basic nutrition 8% Source: Development Initiatives based on OECD DAC CRS data Between 2006 and 2010. 2009). followed by malaria control. the long term sustainability of which is questionable. . without which some of the recent gains in health outcomes might not have been achieved. 39% of aid to health was for basic health care. and (iii) the introduction of new funding models (performance-based funding). such as the Global Fund to Fight AIDS. These include global initiatives modelled on public-private partnership (PPP) arrangements. Tuberculosis and Malaria (GFATM). Alemu (2009) further states that these funding mechanisms have led to (i) a global political and technical focus to deliver results for targeted interventions. Other programmes that received a significant portion of donor funding include infectious disease control and basic nutrition.

6% Ireland. 15% Source: Development Initiatives based on OEDC DAC CRS data United States.  Food security CIDA is committed to supporting Ethiopia’s efforts to achieve food security as a prerequisite to its sustainable development. newborn and child health: CIDA is committed to protecting and improving the lives of Ethiopia’s children and youth. US$50m. with a focus on market-oriented approaches. followed by Germany and Japan. US$22m.Ethiopia | 28 Box 6: Canadian International Development Assistance (CIDA) in Ethiopia In 2010 Canada was Ethiopia’s third largest bilateral donor. 35% Japan. Figure 26: Top aid donors to the agriculture sector. 22% US$115m. The purpose of CIDA’s aid to Ethiopia is to increase agricultural productivity through improved production technologies. Canada. 2006–2010 Others. rather than major improvements in productivity AFDB. The expansion in agriculture production has been driven by increased in the area of land cultivated. Agriculture Approximately 9% of donor funding goes to the production sector – within this. by ensuring that those living in rural areas are reached by high-impact health interventions. Canada’s programmes are aligned to Ethiopia’s national priorities in the following ways. 2010). between 2006 and 2010. each with 15% contributions. agriculture production still remains low. US$74m. Though agriculture production has increased considerably due to favourable weather conditions and increasing government support. CIDA continues to help address the root causes of chronic food insecurity in Ethiopia and to protect the vulnerable through productive safety-net programmes and by increasing agricultural productivity and farmers’ incomes by means of improved production techniques and market -oriented approaches. who are amongst the country’s most vulnerable citizens. 7% . US$50m. US$18m. 15% Germany. agriculture amounted to US$789 million. CIDA’s priority areas in Ethiopia include:  Children and youth including maternal. Canada is the largest donor to the agriculture sector (35%).

and also reduces the benefits of development gains. Aid to the agriculture sector is aligned to the government’s agriculture priorities and compliments government’s resources in 1) achieving sustainable increases in agricultural productivity and production. excluding education. the education sector has received the largest proportion of ODA (20% between 2006 and 2010). land resources (US$72 million) and water resources (US$53 million). followed by agricultural development (US$133 million). up from -2. In 2010. . This allocation was a direct implementation of the government’s policy to increase access to basic education and to improve education indicators. Erratic and extreme weather conditions. The Government of Ethiopia has embarked on the implementation of economic reform programmes in its revenue and expenditure aimed to reorient the economy.8% in 2011. significantly higher than the Eastern Africa average of 6. broad-based and equitable economic growth.7% in 2004/05. The Growth and Transformation Plan (GTP) is the current development plan under implementation.2% in 2003. The PSNP provides safety nets transferred to the poor and chronically food insecure districts through public works and direct support. and which have focused specifically on economic growth and poverty reduction. the GoE together with other donors implemented the Productive Safety Nets Programme (PSNP) as a mechanism to cut back on annual appeals to donors for assistance.7%. The highest share of public spending was on education. and 3) improving productivity of natural resources. Total government expenditure increased from US$3. followed by forestry. Growth in Ethiopia is broad-based with the industry and service sector displaying the largest growth. The GTP seeks to sustain rapid. By 2010/11 GDP growth had reached 10%. public debt. followed by national defence. poverty and poor infrastructural development increases the vulnerability of the population to food insecurity and under-nutrition. over 25% of total government expenditure was allocated to the education sector. and public order and security.9% in 2004 to 46. mainly to primary education. In 2005. 2) accelerating agricultural commercialisation and agro-industrial development. In addition. agricultural research and agricultural extension. the proportion of people living below the national poverty line had declined to 29.6 billion in the same period. coupled with. domestic tax and non-tax revenue had increased to US$4.9 billion. administration management and basic education.Ethiopia | 29 Between 2006 and 2010 the largest sub-sector was agricultural inputs (US$263 million). About 10% of the Ethiopian population is vulnerable to food insecurity and dependent on government social safetynet programmes. Between 2006 and 2010. agricultural development received the largest proportion of aid.6% from 38.2 billion to US$5. Within the education sector. Summary of findings Ethiopia is currently the fastest growing economy in sub-Saharan Africa. which indicates that donor and government priorities are aligned. By 2010/11. which increased from 36. but still remains high. By 2010/11. the larger shares of government expenditure in Ethiopia did not go to social sectors that support poverty eradication. from US$2 billion in 2005. Increased government expenditure and aid to the education sector have facilitated improvements in education indicators such as literacy rates. In totality. the majority of aid goes to education policy. Poverty in Ethiopia is reducing.

while aid accounts for 39% of total health spending in Ethiopia. 2001 set a benchmark of a minimum of 15% of government expenditure on health spending. In Ethiopia. It is important that growth and infrastructural development are equal and targeted towards those living in poverty. and social protection would potentially reduce vulnerability and make development gains more sustainable. This allocation is aligned to government priorities for the agriculture sector. above the 10% CAADP benchmark.Ethiopia | 30 The Abuja Declaration. there has been an overall increase in education expenditure in Oromiya and Afar compared to other regions. access to health services is biased towards urban and easy-to-reach areas compared to rural areas. public spending on health is currently 13%. as well as commercialisation and development of agro-based industries. Aid to the health sector is spent primarily on basic health care. economic stability.5% in 2007/8. which is similar to government allocations. It is also critical that the resilience of the vulnerable population is built to improve their response to shocks (increase their coping strategies) and increase their preparedness for future shocks. For example. Rapid population growth compared with sector growth could be one important contributor to this. The agriculture sector is the leading contributor to growth in Ethiopia. despite its decreasing share of GDP. Similarly. There has also been unequal growth and investment in Ethiopia. its share of GDP diminished from 5% in 2004/5 to 4. health and poverty indicators. Aid to the health sector accounts for 18% of total aid to Ethiopia. Mechanisms including policies on disaster risk reduction. and highest in the easy-to-reach regions of Dire Dawa and Addis Ababa. . However. below the minimum requirement. climate change. Despite increased investment. sociodemographic and poverty indicators through increased investment in social sectors and the implementation of pro-poor policies.4% – above the 6% CAADP target – while expenditure on agriculture as a proportion of government expenditure was 15%. Government expenditure on health accounts for over 50% of total health spending. there has been only a slow improvement in socio-economic. Analysis reveals that Ethiopia has made steady progress towards improving socio-economic. Interventions that increase economic growth also contribute directly to poverty reduction. Although total government expenditure on health has been increasing.Oromiya and Afar. Agricultural growth in 2010 was 6. which include increasing production and productivity. ODA to the agriculture sector goes largely towards agricultural inputs. public expenditure in the education sector is low in the poorer regions of Ethiopia. agricultural development and land and water resources.

the Ministry of Finance and Economic Development and the Central Statistical Agency of Ethiopia. as well as datasets from the World Bank World Development Indicators. WDI and SPEED datasets. Health: The main sources of health data were the Ministry of Finance and Economic Development. Brazil. notes and definitions The methodological approach used for this paper involved desk reviews of existing information and literature from Government of Ethiopia web pages and the web pages of development partners in Ethiopia. – ODA is defined as assistance from OECD DAC member countries.Ethiopia | 31 Methodology: basic concepts. International Food Policy Research Institute (IFPRI) Statistics of Public Expenditure for Economic Development (SPEED) and the International Monetary Fund (IMF). were not considered. Definitions Agriculture expenditure: Expenditure made in the agriculture sector within a defined period for the production of goods and services consumed or used within the defined period. broken down into sub-sectors. Methodological limitations – The main limitation was the availability of sources for government budget information. Gross national product (GNP): The value of all final goods and services produced in a country in one year (GDP) plus income that residents have received from abroad. and excludes aid from nonDAC donors. the Education Statistical Abstracts. such as remittances and foreign direct investment. Domestic resource flows Education: Education data was obtained from the Ministry of Education website. investment. India and Russia. Gross national product per capita: A country’s GNP divided by its population. Education expenditure: Expenditure made in the education sector within a defined period for the production of goods and services consumed or used within the defined period. Gross domestic product (GDP): The value of final goods and services produced in a country in one year. National Health Accounts and World Development Indicators. minus income claimed by nonresidents. – Other sources of government revenue. Agriculture: The key sources of data were WDI and SPEED. GDP can be measured by adding up all of an economy’s incomes. government purchases and all net exports. expenditures. such as China. . International resource flows Data for international resource flows was obtained from the OECD DAC datasets. – Secondary sources of data were used for some of the analysis.

However. Per capita expenditure: Expenditure per person. Official development assistance (ODA): Flows of official financing administered with the promotion of the economic development and welfare of developing countries as the main objective. Poverty headcount: The headcount index measures the proportion of the population that is poor. the chance of his/her survival were the same as they were for that age group in the year of his/her birth. the number of individuals living below the poverty line. the number who die before reaching their first birthday. Infant mortality rate: Of every 1. the HDI yields little specific information about each country.Ethiopia | 32 Health expenditure: Expenditure made in the health sector within a defined period for the production of goods and services consumed or used within the defined period. Poverty gap: This is a measure of the extent to which individuals fall below the poverty line.000 infants born. This is computed by dividing the total expenditure by the total population or certain group of the population for which the spending is intended. Population growth rate: The increase in a country’s population during a certain period – usually one year – expressed as a percentage of the population when the period began. also known as the poverty severity index. The population growth rate is the sum of the difference between the birth rate and the death rate (the natural population increase) and the difference between the population entering and leaving the country (the net migration rate). and which are concessional in character with a grant element of at least 25% (using a fixed 10% rate of discount). as a proportion of the poverty line. The change in this indicator reflects changes in the overall health of a country’s population. OECD member countries exchange economic data and create unified policies to maximise their countries’ economic growth and help non-member countries develop more rapidly. . Human Development Index (HDI): A composite of several social indicators that is useful for broad cross-country comparisons. Organisation for Economic Co-operation and Development (OECD): An organisation that coordinates policy among developed countries. in people’s living conditions and in the quality of health care. at each age he/she passes through. Poverty gap squared: This is a measure for the degree of inequality among poor people. Life expectancy at birth: The number of years a newborn baby would live if. i.e. Poverty line: This corresponds to the level of income or consumption necessary to meet a set of minimum calorific and non-food requirements.

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analyse. Uganda. If you would like to discuss this paper in more detail or would like additional information. The Africa hub. In order to achieve this. Its core programmes – Global Humanitarian Assistance. The hub sees better information as being a fundamental tool to improve policies and influence the allocation of resources to address chronic and extreme poverty in the region. and influences policy to incorporate and prioritise chronic poverty objectives. the hub provides high-quality analysis on resource flows. . enhances the capacity of key stakeholders to access. Peace Nganwa is an Analyst for Development Initiatives’ Africa hub and is based at our partner organisation Development Research and Training (DRT) in Kampala. provides a regional perspective to DI’s work on eradicating poverty. aidinfo.org. interpreting and improving information about resources for poverty elimination by making it more transparent and accessible. multilateral organisations and NGOs since 1992.nganwa@devinit. forms partnerships and engages with like-minded organisations working on similar issues. use and understand information. budget4change – focus on analysing. please contact peace. Kenya. based in Nairobi.Ethiopia | 36 About us Development Initiatives (DI) has been working with governments.

security and opportunity for the world's poorest people. Africa hub 4th Floor Shelter Afrique Building Mamlaka Rd PO Box 102802-00101 Nairobi Kenya . and in enhancing choice. Our vision is to Eliminate Poverty by 2025. and the capacity to use it. We Empower by putting this information. We believe that transparent and accessible information can play a key role in making aid more Effective. in the hands of poor people and others working to reduce poverty.Ethiopia | 37 Development Initiatives – an independent organisation working for poverty elimination. We Engage to increase access to and understanding of information and statistics related to poverty. Development Initiatives.

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