Ethiopia Finance and Economy

By | December 17, 2021

Finances. – The organization and direction of the state finances are entrusted to Western consultants; the State Bank (founded in 1942 and entered into operation in April 1943) presides over the discipline of the country’s economic and financial activity, headed by foreign executives, mostly from the USA. been and also functioning as an issuing institution, its position as an economic company has been privileged from the beginning, with positive operating results; his administration, however, appeared to be soundly planned and conducted. The monetary unit is the thaler (b ĕ r) or Ethiopian dollar (put into circulation in 1945), based on the decimal division system and divided into cents; its gold standard is about 0.3577 g of gold; the official parity with the US dollar is fixed at 2.484 Ethiopian dollars; exchange rates for purchases and sales vary from 2,475 to 2,525. To compensate for the scarce possibility of granting small, low-interest loans (for a maximum period of three years), the Agricultural and commercial Bank of Ethiopia was created in 1945, also state-owned, whose activity, however, was scarce and was absorbed by the Ethiopian Bank for Progress (The Development Bank of Ethiopia), set up by the government in 1951, at the request of the International Bank for reconstruction and development on the occasion of the third loan granted by the latter to the Ethiopia. It acts with special criteria, exercising medium-term credit to encourage the expansion or formation of commercial enterprises, in whose risk it intervenes with loans or shareholdings, and, when necessary, with technical advice. To carry out an immediately profitable business, in 1951 the Bank created the subsidiary company “Ceres”, acting as a commission agent for the purchase of agricultural products on behalf of traders and granting market loans.

The tax system, created by Europeans according to Western criteria, has led to the abolition of the multiple taxes and charges in kind on land, replacing them with a double tax in money, commensurate with the quality of the land; the lands of the Church have a separate treatment. Nomadic subjects pay a livestock tax. The main source of the state’s income, however, is the taxes on commercial activities and first of all customs duties (almost half of the total income).

Commercial relations with foreign countries, over half of which are represented by coffee exports, had an active trend for most of the period under review. In the years in which there was a deficit in the balance of goods and services, the inflow of foreign financing in the form of loans was sufficient to offset the effect, allowing even a modest increase in foreign exchange reserves. In 1958, the divergence between the movement of exports and that of imports led to a relatively large net negative balance, which was countered, in addition to a reduction in foreign exchange reserves, by new credits granted by the World Bank and more substantial aid. Americans.

Economic life ; communications. – Up to now the economic and financial aid of the USA has been conspicuous and essential, granted in various forms, while the technical aid has allowed, among other things, to create Ethiopian civil aviation (the “Ethiopian Air Lines” was established in 1945 by the US company “Trans World Airlines”, which supplies the material and the technical and navigating staff). Important is the multiple cooperation of the USA concerning the preparation and implementation of technical collaboration programs in the various branches of the country’s economic life, with the US contribution in specialized personnel and financial means (up to 1958 the United States had spent about 27 million dollars SUA for these initiatives in Ethiopia, not counting separate aid for the execution of military programs). a) the maintenance and construction of major communication roads; b) the development of telecommunications; c) the granting of credit to farmers and industrial enterprises. Other nations have granted, sometimes with private intervention, cash loans and supplies of materials and industrial products: Sweden (1945-46), Yugoslavia (1957-59), Czechoslovakia (1959), Germany (1959), Russia (1959)): the latter’s intervention, of considerable magnitude, concerns technical plants for industrial production and vocational education centers for technology. The collaboration of foreign nations also extends, officially or unofficially, to the sending of missions of experts who direct the technical and administrative activities in the various branches of public life. A five-year plan (1957-61) was drawn up (mainly with the help of Yugoslavs) to accelerate development in the country. For Ethiopia economics and business, please check

To improve the economy, attempts are made to stimulate a more appropriate production and selection of goods for export (especially coffee, skins, grains) and to attract foreign private capital for the creation of industries, still rare and with production destined for absorption. of the domestic market (sugar, textiles), all in the hands of foreigners, even if the companies appear to be Ethiopian in the legal constitution. To increase traffic with foreign countries through the accesses to the sea, which Ethiopia has after the federation with Eritrea, the construction of new port facilities in Assab was begun (1958), where the influx of goods is it has been growing since 1953, in competition with the traffic carried out through the port of Djibouti.

The availability of the coasts and sea ports (Massawa and Assab) following the federation of Eritrea with Ethiopia, led to the establishment of a general directorate of the navy (1953), annexed to the Ministry of National Defense, and to give principle to maritime legislation (1953) and to the formation of a civil navy (up to now composed of some small boats for local fishing or small cabotage, mostly owned by Italians) and an Ethiopian military (both employed by the aforementioned ministry), with the ” instruction of specialized personnel (on the Ṭānp̀ lake the navigation is carried out by some boats, the most already Italian, managed by the Navigatana company, made up of Italians, based in Gorgorp̀, which continues the traffic and business started during the Italian administration).

Ethiopia economics and business