Abstract
Following the near collapse of the Ethiopian economy in the early 1990s, as well as unsustainable internal and external imbalances, high inflation rates, negative interest rates and very high debt ratios, Ethiopia implemented a Structural Adjustment Program (SAP), with the support of multilateral and bilateral donors. The goals of SAP include the stabilization of the economy in order to restore macroeconomic and financial stability, as well as the stimulation of medium and long-term growth. The Ethiopian structural adjustment policies were aimed at eliminating financial repression, encouraging the development of the private sector, fostering competition throughout the economy, and promoting the process of market-determination of all prices, including exchange rate and interest rate (African Development Bank Group, Ethiopia Structural Adjustment Programme Project Performance Evaluation Report (PPER)).
While SAP has spurred a robust and an unprecedented economic growth in Ethiopia for over two decades, there has been inadequate assessment of the impact of that growth on sustainable development (Ethiopia’s economic growth rate has averaged about 10% within the past decade, making it one of the fastest-growing countries in the world.). Most of the studies of the Ethiopian SAP have focused mainly on economic growth and macroeconomic stability. This chapter uses a Triple-Bottom-Line (TBL) analytical framework to evaluate the impact of SAP on the three dimensions of sustainability: economic, equity and environmental sustainability (A Triple-Bottom-Line (TBL) analytical framework transcends economic growth per se, but also considers equity and environmental sustainability). Information and data for the TBL analysis were gathered through secondary sources, content analysis of Ethiopian media publications, interviews of a cross-section of Ethiopians, and visits to different regions of the country. Results from the research suggest that, while Ethiopia’s structural adjustment has satisfied the economic dimension of the TBL, it has not been socially inclusive and environmentally sustainable.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
Africa has had a number of “success stories” in the past four decades. They include Ghana, Mauritius, Botswana, South Africa, Tunisia, Morocco and Senegal. Quite often, those success stories quickly turn into disappointments, as in the case of Tunisia, Morocco, Ghana and South Africa.
- 2.
The coup was said to have been motivated by the fact that, compared with the newly independent African states, Ethiopia was “far behind in economic development, education, and living standards.” (Clapham 1968, p. 502).
- 3.
Socialist-oriented regimes sometimes embrace neoliberal economic and financial sustainability policies for pragmatic reasons, as in the cases of Ghana under Jerry Rawlings, and Brazil under Luiz Lula da Silva. With the Soviet Union no longer in existence to provide financial support, these regimes turn to the West and its affiliated multilateral financial institutions, who in turn demand implementation of neoliberal policies as a quid pro quo for support.
- 4.
These days, bilateral and multilateral donors tend to support only economic reforms undertaken by democratic regimes. Financial support is mostly conditioned on the implementation of political reforms, democratization and good governance.
- 5.
Ethiopia’s economic growth plummeted to an all-time low of about 1.9% in 2020, due to the COVID pandemic. The country’s robust economic growth is expected to rebound in 2021 and reach an impressive rate of about 9% by 2022 (IMF database: https://www.imf.org/en/Publications/WEO/weo-database/2020/October/weo-report?)
- 6.
Gebregziabher (2013) argues that Ethiopia’s economic growth was facilitated mainly by the massive infusion of aid in the country. If so, it may suggest that SAP does not by itself spur economic growth. It has to be combined with aid in order to be successful.
- 7.
See Ethiopia: Agricultural Risk Assessment Study, Platform for Agricultural Risk Management (PARM), December 2016.
- 8.
See A. R.A. Shaban, “Ethiopia central bank announces 15% devaluation of Birr,”
Reuters, October 10, 2017 (https://www.africanews.com/2017/10/10/ethiopia-central-bank-announces-15-percent-devaluation-of-birr//)
- 9.
K. Salam, “The Blue Nile Is Dammed,” Foreign Policy, July 24, 2020 (https://foreignpolicy.com/2020/07/24/the-blue-nile-is-dammed/)
- 10.
J. Marsh, “Skyscrapers, trains and roads: How Addis Came to Look Like a Chinese City.”
CNN Report, September 2018 (https://www.cnn.com/style/article/addis-ababa-china-construction-style/index.html)
- 11.
The decrease in growth in the late 1990s was a result of the war with Eritrea in 1998–2000, as well as a severe drought during 2002–2003.
- 12.
Ethiopia’s structural adjustment policies and high growth rates have resulted in persistent increases in the rate of inflation, from just 0.7% in 2000 to almost 16% in 2019 (Table 8.3). To slow down inflation, the Ethiopian Central Bank raised interest rates by 2 percent in October 2017.
- 13.
World Bank Report, Ethiopia Poverty Assessment: Poverty Rate Declines, Despite Challenges, April 2020 (https://www.worldbank.org/en/country/ethiopia/publication/ethiopia-poverty-assessment-poverty-rate-declines-despite-challenges)
- 14.
United Nations Children’s Fund (UNICEF) Report, Multi-dimensional Child Deprivation in Ethiopia, 2018 (https://www.unicef.org/ethiopia/reports/multi-dimensional-child-deprivation-ethiopia-first-national-estimates)
- 15.
World Bank Report, Poverty and Equity Brief, April 2020 (https://databank.worldbank.org/data/download/poverty/987B9C90-CB9F-4D93-AE8C-750588BF00QA/SM2020/Global_POVEQ_ETH.pdf)
- 16.
United Nations Development Programme (UNDP), Human Development Index Ranking, 2019 (http://hdr.undp.org/en/content/2019-human-development-index-ranking)
- 17.
Habitat for Humanity, Great Britain, “Slum Housing in Ethiopia.” https://www.habitatforhumanity.org.uk/blog/2017/11/slum-housing-ethiopia-modernise/
- 18.
Literacy rate applies to people 15 and above. See World Bank, World Development Indicators (https://data.worldbank.org/indicator/SE.ADT.LITR.ZS)
- 19.
D. Botti, and M. Phillips, “Record numbers of refugees and migrants arrive in Yemen amidst intensifying and complicated war,” Relief Web, August 2019
- 20.
A report by the Global Forest Watch (GFW), an organization that uses an open-source web application to monitor global forests in near real-time. See GFW’s report on Ethiopia at www.globalforestwatch.org/dashboards/country/ETH/?category
- 21.
One evidence of this is the sight of monkeys abandoning their natural habits and hanging around highways, as well as mingling with tourists. The highway between Addis Ababa and Bahir Dar in Northern Ethiopia is filled with hundreds of monkeys trying to adapt to human-induced disruptions of their natural habitats.
- 22.
A. Evans, Resources, Risk, and Resilience: Scarcity and Climate Change in Ethiopia, August 2012. Center on International Cooperation, New York University. https://cic.nyu.edu/sites/default/files/evans_security_ethiopia_2012.pdf
References
Abadi, Tadesse and Tekie Alemu (1996), Adjustment in Ethiopia: Lessons for the Road Ahead. Addis Ababa,
Ayres R. (2008). “Sustainability economics: where do we stand?” Ecological Economics 67: 281-310.
Baye, T.G. (2017), “Poverty, Peasantry and Agriculture in Ethiopia,” Annals of Agrarian Science, 15: 420-430.
Brundtland GH. (Ed.) (1987). “Our common future, Report of the World Council for Economic Development,” Oxford University Press, New York.
Clapham, C. (1968), “The Ethiopian Coup d’Etat of December 1960,” The Journal of Modern African Studies, 6 (4): 495-507.
Clapham, C. (2006), “Ethiopian Development: The politics of Emulation,” Commonwealth & Comparative Politics, 44, 1: 137-150.
Collier, P. and Gunning, J. (1999), “Why Has Africa Grown Slowly?” The Journal of Economic Perspectives, 13 (3): 3-22.
Daly H. (1990). “Toward Some Operational Principles of Sustainable Development,” Ecological Economics, 2: 1-6.
Dercon, S. (2005), Vulnerability: A Micro Perspective, Unpublished Manuscript, April.
Dercon, S., and R.V. Hill. 2009: Growth from agriculture in Ethiopia: Identifying key constraints. Paper prepared for the Department for International Development–funded study Understanding the Constraints to Continued Rapid Growth in Ethiopia: The Role of Agriculture.
Dorosh, P., Schmidt, E., and Shiferaw, A. (2012), “Economic Growth without Structural Transformation: The Case of Ethiopia,” Journal of African Development, 14, Number 2.
Gebreeyesus, M. (2013), “Industrial Policy and Development in Ethiopia: Evolution and Present Experimentation,” WIDER Working Paper 125, Helsinki: Finland.
Gebregziabher, F. (2013). The Long-Run Economic Effects of Aid and Disaggregated Aid in Ethiopia, Journal of International Development, 26(4): 520–540.
Girma, K. (1987), “State Capitalism and Development: The Case of Ethiopia,” The Journal of Developing Areas, 22 (1): 1-24.
Jacobs M. (1995). “Sustainable development – from broad rhetoric to local reality.” Conference Proceedings from Agenda 21 in Cheshire, 1 December 1994, Cheshire County Council, Document No. 493.
Kassahun, R. (2002), Structural Adjustment and Macroeconomic Reform in Ethiopia, Doctor of Philosophy Dissertation, University of California, Riverside.
Koehn, P. (1975), “Ethiopian Politics: Military Intervention and Prospects for Further Change,” Africa Today, April – June, pp. 7–21.
Kuto, L., Bacha, A., and Baru, A. (2018), “The Influence of Mechanized Farming and Industrialization on the Oromo People, their Traditional Livelihood Strategies and their Environment in Ethiopia,” Environmental & Socio-Economic Studies, 6(2): 29-39.
Lewis, W.A. (1954), “Economic Development with Unlimited Supplies of Labour,” The Manchester School 28 (2), pp. 139-191.
Moller, L.C. and Wacker, K.M. (2017), “Explaining Ethiopia’s Growth Acceleration—The Role of Infrastructure and Macroeconomic Policy,” World Development, 96, 198-215.
Onyeiwu, S. (2015), Emerging Issues in Contemporary African Economies, New York City: Palgrave Macmillan.
Onyeiwu, S. Pallant, E. and Hanlon, M (2011) “Sustainable and Unsustainable Agriculture in Ghana and Nigeria,” Ecosystems and Sustainable Development, VIII.
Prunier, G. and Ficquet, E. (2015), Understanding Contemporary Ethiopia, London: C. Hust & Co.
Rigby D, Woodhouse P, Young T, Burton M. (2001). “Constructing a farm level indicator of sustainable agricultural practice,” Ecological Economics 39: 463-478.
Sachs, J.D. (2015), The Age of Sustainable Development, New York: Columbia University Press.
Sen, A. (1999), Development as Freedom, New York: Koopf.
Shadish, W. Cook, T. and Leviton, L. (1991), Foundations of program Evaluation, London: Sage Publications).
Shewadeg, B. (2019). Ethnic Conflict under Ethnic Federalism. Retrieved April 30, 2020, from ACCORD website
Sperling, G. (2020), Economic Dignity, London: Penguin Press.
Tadesse, T. and Abafia, J. (2019), “The causality between Financial Development and Economic Growth in Ethiopia: Supply Leading vs Demand Following Hypothesis,” Journal of Economics and Financial Analysis, 3 (1): 87-115.
Tashu, M. M. (2003), “Macroeconomic Development and Private Sector Performance in Ethiopia: the 1990s Experience,” Northeast African Studies New Series, 10, 1, 169-190.
Teffera, H. (2012), Tower in the Sky, Addis Ababa: Addis Ababa University Press.
Teka, A.M. and Lee, S. (2019), “The impact of agricultural package programs on farm productivity in Tigray-Ethiopia: Panel data estimation,” Cogent Economics and Finance, Published Online, June 26.
Turner, S. (1986), Ethiopia: Economy, Africa South of the Sahara. London: Europa Publications.
UNDP, (2018), Ethiopia’s Progress Towards Eradicating Poverty, Addis Ababa, April 6.
Woldesenbet, W.G. (2020), “The Tragedies of a State Dominated Political Economy: Shared Vices Among the Imperial, Derg, and EPRDF Regimes of Ethiopia,” Development Studies Research, 7 (1): 72-82.
Wolfgram, S.A. (2006), Global Development and Remote African Villages, Lewiston, NY: The Edwin Mellen Press.
World Bank (1994), Adjustment in Africa: Reforms, Results, and the Road Ahead, Washington, DC.
World Bank, (2019), Ethiopia’s Poverty Assessment: Harenessing Continued Growth for Accelerated Poverty Reduction, Washington, DC.
World Bank, (2020), Ethiopia Poverty Assessment: Harnessing Continued Growth for Accelerated Poverty Reduction, Washington, DC.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2022 The Author(s), under exclusive license to Springer Nature Switzerland AG
About this chapter
Cite this chapter
Onyeiwu, S. (2022). The Nexus of Structural Adjustment, Economic Growth and Sustainability: The Case of Ethiopia. In: Antoniades, A., Antonarakis, A.S., Kempf, I. (eds) Financial Crises, Poverty and Environmental Sustainability: Challenges in the Context of the SDGs and Covid-19 Recovery. Sustainable Development Goals Series. Springer, Cham. https://doi.org/10.1007/978-3-030-87417-9_8
Download citation
DOI: https://doi.org/10.1007/978-3-030-87417-9_8
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-030-87416-2
Online ISBN: 978-3-030-87417-9
eBook Packages: Earth and Environmental ScienceEarth and Environmental Science (R0)