Funding the Ethiopian state: who pays

Abstract

Two topics have dominated discussion of Ethiopia in recent years. One is the military position in the north and to a lesser extent the east of the country, and the other is the agricultural situation, frequently, but not solely, concerned with famine in Wollo and Tigre. Although these topics are undoubtedly important in any analysis of the current situation, their predominance in discussion has tended to create an imbalance in the overall picture. By 1985 agricultural production contributed only 44% of Gross Domestic Product and yet we hear little of the nature and significance of the remaining 56% consisting principally of industrial production (16%) and services (39%). Among more general economic indicators, occasionally price inflation or the balance of payments is mentioned, but rarely in a context of overall economic performance and usually in connection with the agricultural situation. Of key importance in all such discussions is the role of the state whose influence pervades every aspect of economic and political decision making. Yet it is evident that the Ethiopian state depends in large measure upon the economy as a whole for its support not only in funding the military but also in maintaining the state machinery and in subsidising a number of developmental projects. This article addresses itself to the problem of state financing drawing on these other partly neglected aspects of the economy.