1. Economic Reform
Before the beginning of the 1990's, Ethiopia had a centrally planned economy with severe price
distortions. The economy was dominated by the state which controlled product and factor
markets and directly owned the bulk of the modern sector of the economy. In general, the
country had a highly regulated and closed economy. This had resulted in the marginalization of
the private sector and a decline in economic growth.
After the overthrow of the military regime in 1991, however, a significant progress has been
achieved in economic development due to sound economic policies. First, the Transitional
Government that was formed in 1991, acted to put the private sector at the center of the
Ethiopian economy. In this regard, a number of important economic policy measures and
reforms have been taken by the Transitional Government and the elected Federal Government
that followed it. Specially, since the introduction of the new market oriented economic policy in
1992, the following measures, among others, were taken to change the structure of the economy
and encourage rapid economic growth.
· Deregulation of domestic prices;
· Abolishing of all export taxes (except on coffee) and subsidies;
· Reduction of inflation through budgetary and monetary controls;
· Liberalization of foreign trade;
· Devaluation of the national currency, the Birr, to reflect its market value;
· Privatization of public enterprises;
· Promulgation of a liberalized investment law for the promotion and encouragement of private
investments, both foreign and local;
· Issuance of a new labour law;
· Liberalization of the foreign exchange regime;
·Enhancing private sector development and private-public partnership through providing
effective industry association and creating a forum for consultation between the private sector
and government.
· Strengthening and enhancing institutional support for the export sector.