Ethiopia is home to one of the world's oldest civilizations. Its former imperial family, who claimed to be descendents of Solomon and Sheba, were overthrown in 1974. Under the Derg regime that came to power until its ouster in 1991, the country experienced political turmoil, repression and economic mismanagement, amidst an intensifying civil war and the periodic tragedy of large-scale deaths from famines. In 1991, when the civil war ended, Ethiopia had approximately the lowest per capita income in the world. The country's social indicators and infrastructural network, such as its educational enrollments, health status and access to roads were far below the averages for Sub-Saharan Africa. Despite instituting some of the most ambitious programs in the region, Ethiopia faces steep economic and social development challenges.
Fortunately, since 1991, Ethiopia's economy has experienced a remarkable degree of macroeconomic stability and good growth on average. This is in-spite of its 1998-2000 conflict with Eritrea. Since 1992, average annual inflation has been in the low single digits and GDP growth has averaged around six percent a year. Growth however has been highly variable, reflecting the dependence of the economy on a rain-fed agricultural sector subject to frequent drought. The prices of Ethiopia's primary export, coffee, have been declining along with the country's terms of trade. Between FY00 and FY03, with the collapse of coffee prices, the terms of trade declined by some 40 percent. The drought of 2001-2002 (which straddled the FYs 2002/03) was the most severe since the one in 1984/5.
To address many of these economic and social development obstacles, the Initiative for Policy Dialogue (IPD) organized a visit to Ethiopia in August 2004, in partnership with the Ethiopia Development Research Institute (EDRI) and the Inter-Africa Group (IAG). UNDP provided financial support. The IPD team comprised Joseph Stiglitz, IPD President, Akbar Noman, IPD Senior Policy Fellow, and Robert Wade, London School of Economics.
The team traveled to Ethiopia to engage the government, academics, private sector, other civil society stakeholders and the donor community in economic policy discussions. A primary goal was also to promote dialogue amongst these groups. The IPD team held a met with Prime Minister Meles Zenawi and other senior policy makers, and culminated their visit with a public dialogue attended by a diverse audience of some 400-500 persons. A similar audience attended a set of two public lectures by Professor Stiglitz and Professor Wade.
The dialogue served to facilitate and improve communications, notably between the government and the private sector, but also between politicians, academics. The most significant impact of the dialogue were its contributions to debates on the appropriate role of the state; the potential and pitfalls of industrial policy; export promotion as a way to bolster the industrial sector and achieve economic diversification; the role of the financial sector in supporting growth in SMEs; and the impact of agricultural price policy on rural development. For a full review of the policy debates please see the Ethiopia Country Dialogue Report.