With an estimated total population of 129.5 million in 2024, Ethiopia is one of the top performing economies in Sub-Saharan Africa. According to the United Nations common country analysis, the year 2024 in Ethiopia was marked as a year defined by resilience and transformation amidst complex and overlapping challenges. Political instability and conflicts, climate-induced shocks like droughts and floods, economic shocks or inflation due to international crisis, and crop pests like the locust manifestations tested the nation’s economic growth.
Despite the above major challenges, the economy has shown some degree of resilience and has been achieving economic growth for the last few years. The country’s economy grew by 6.1 percent in 2023 according to the IMF estimate and projected a real GDP growth of 6.4 percent for the year 2024.
Agriculture is the main stay of the economy; and exports are almost entirely relying on agricultural commodities. Coffee fetches the largest foreign exchange. Other agricultural products that earn foreign exchange include oil seeds, dried pulses, hide and skin as well as live animals. The young flower industry is also becoming another source of foreign revenue.
The agricultural sector
In Ethiopia, agriculture accounts for 34.6 percent of the GDP, serving as a major source of livelihoods for 80 percent of the population and generating 90 percent of export revenue. The country's agriculture and rural development policy, along with its strategy and implementation guidelines, were formulated in 2002 and guided the sector until 2023. During this period, the sector experienced significant growth in production and productivity, contributing to the acceleration of other economic sectors.
However, the widening gap between sectoral development and the increasing demand for production has led to a rise in food insecurity among citizens. Agriculture has struggled to supply the necessary quality and quantity of raw materials for the industrial sector. Additionally, there has been a significant shortfall in agricultural products for export, which could have helped balance imports and exports. The transition from low to high agricultural productivity has also failed to meet its objectives.
The current Agriculture and Rural Development Policy was revised in 2024, establishing five complementary focus areas. These include the extensive use of human resources, proper management of land and natural resources, and the implementation of integrated, diversified agro-ecological, market-led, and rural development activities.
According to the country’s Ten-Year Development Plan (2021-2030), key priorities for agricultural development include reducing reliance on rain-fed agriculture by enhancing irrigation capacity; expanding agricultural mechanization services; enabling productive smallholder farmers to invest by improving access to additional land; enhancing animal husbandry, fodder development, and animal health; promoting horticulture; increasing private sector participation in agriculture; building institutional capacity within the sector; creating job opportunities; and improving agriculture's resilience to climate change by mitigating the impacts of environmental and climatic changes.
The main objectives of the agricultural development plan are to raise the incomes and livelihoods of farmers and pastoralists, ultimately eradicating poverty by enhancing agricultural productivity and competitiveness; facilitating structural transformation of the economy to meet the nation’s food and nutritional needs through modernization; supplying raw materials for the industrial sector; providing adequate quantities of value-added exportable agricultural products; creating sufficient job opportunities in rural areas; and reducing the sector's vulnerability to climate change. To this end, both the Ten-Year Development Plan and the Home-Grown Economic Reform (HGER) of the country identified agriculture as a key sector for economic growth and poverty reduction, contributing 37.64% to the GDP by 2030.
FAO priorities and initiatives
Ethiopia is one of the focus countries for the implementation of FAO regional initiative “Africa’s Renewed Partnership to End Hunger by 2025”. This partnership calls for accelerated action by member countries in the fight against hunger through the establishment of ambitious targets within the Comprehensive Africa Agricultural Development Program (CAADP) framework. In addition, the country is a focus country for the regional initiative on Building Resilience in Africa’s Dry lands. This initiative aims to strengthen institutional capacity for resilience; support early warning and information management systems; build community level resilience; and respond to emergencies and crises.
FAO is committed to helping countries achieve a healthier, more sustainable future. That means finding the right combination of policies, innovations and public and private investment to achieve to the Sustainable Development Goals (SDGs) and attain FAO’s four betters’ dimension of agrifood systems – better production, better nutrition, a better environment and a better life for all.
Ethiopia has identified agro-industrialization as having the potential to lead a structural transformation of the economy and the modernization of the agriculture sector. The approach is envisaged to make markets available for smallholder farmers to sell their produce, contributing to increased income, creating off-farm employment in processing and services (particularly relevant for youths) and creating economic opportunities for small and medium enterprises thus contributing to the reduction of poverty in rural areas.
Challenges
The Government of Ethiopia recognizes that, despite impressive growth rates, measures of human development remain unacceptably low. According to the 2021/2022 Human Development Index (HDI) report, life expectancy at birth is 65, and annual per capita income is USD 170 (2 361). Infant and maternal mortality and child malnutrition rates are among the highest in the world; and adult literacy has remained at around 40 percent. Furthermore, only 58 percent of the population has access to potable water, and around 12 million people suffer from chronic or transitory or acute malnutrition.
There are marked differences between rural and urban areas with poverty being concentrated in rural areas where most households continue to live on less than USD 0.50 (30.8) per day. Not surprisingly, many rural households find it impossible to survive without access to seasonal wage employment or aid from the Productive Safety Net and related social protection programs. Even though Ethiopia is one of the ten countries globally that has attained the largest absolute gains in its HDI over the last several years, it still ranks 175th out of 191 countries (UNDP, 2022).
Despite the progress made, Ethiopia faces compounded challenges including high levels of multidimensional poverty, increasing climatic shocks such as drought and flooding, while facing heightened conflict risks, amidst the global economic crises with rising prices and inflation - all affecting essential commodities including food. Food insecurity remains a major challenge, with up to 15.8 million people dependent on emergency food assistance in 2024. It is anticipated that the humanitarian funding crisis will further deepen in 2025 with the temporary freeze of US Government aid.
FAO is therefore determined to support the transformation of the agriculture and food systems, which is vital to food security, healthy diets, and economic transformation. The lives of poor people and future poverty reduction in Ethiopia need to be driven by improvements in this sector. Transforming agricultural and rural development requires an effective policy environment and governance systems.