The political economy of poverty reduction in Ethiopia 

• Background
• 1. Overview of poverty trends in Ethiopia
• 2. Distribution of power and responsibilities for poverty reduction policy
• 3. Politics and elections
• 4. Selected policies relating to poverty reduction
• 5. Conclusion

Background

DEEP is committed to accelerating progress in tackling extreme poverty in Ethiopia by contributing to the implementation of policies, strategies and investments that better target and more effectively address barriers and opportunities for tackling extreme poverty. To do this, DEEP is developing a research engagement strategy that considers Ethiopia’s political economy of poverty reduction. This briefing note is intended to help inform the DEEP Challenge Fund, through which new research has been commissioned, to explore how this new research and findings from related DEEP studies can best contribute to poverty reduction efforts in Ethiopia during the life of the DEEP programme and beyond. We also intend for this research to be helpful to others trying to translate poverty-related research on Ethiopia into actionable policy advice. 

This briefing note addresses the following: 

• How has the political economy of poverty reduction in Ethiopia evolved? 
• How are power and decision making distributed? 
• What are the leading policies, strategies and investments relating to poverty reduction? 
• How can progress on poverty reduction be built upon to support the fight against poverty? 

Available at: https://doi.org/10.55158/DEEPPB3 

1. Overview of poverty trends in Ethiopia

Ethiopia achieved remarkable progress in poverty reduction at the turn of the century, halving the proportion of people living in extreme poverty from 66% to 33% between 1999 and 2015 (World Bank n.d.).1 As in many countries however, poverty is on the rise. According to the latest Living Standards Measurement Survey (LSMS), 33% of the population lived below the national poverty line in 2021/22, up from 25% in 2015/16 (World Bank 2024). Much of this increase occurred in rural areas (10% increase) – but poverty is also rising to a lesser extent in urban areas (see Table 1). Real consumption declined in both rural and urban areas. Food consumption fell by 16.4%, accompanied by a significant drop in non-food consumption, reflecting the impact of rising prices for goods and services. 

Women and young village girls collect water from a rain water pool which is purified before use with tablets. Gayo village, Ethiopia

Table 1: Poverty trends in Ethiopia 2015/16–2021/22 

Several factors have contributed to reversals in poverty reduction. One key factor is that many households that escaped poverty lived only slightly above the poverty line and were therefore at risk of falling back into poverty due to idiosyncratic or systemic shocks. The 2014 World Bank Poverty Assessment estimated that 14% of non-poor rural households were at risk of falling into poverty (World Bank 2015). A reduction in agricultural earnings primarily drove the rise in poverty in rural areas, whereas in urban areas, declining self-employment income was a key contributing factor (World Bank n.d.). 

Climate shocks (climate variability and recurrent extreme weather events) have also undermined progress on poverty reducation and strained the resilience of rural households – particularly those reliant on agriculture for subsistence or income. Persistent droughts – which now occur every two to three years – have plagued the country’s agricultural sector, where 80% of the population who live in rural areas earn their income or subsistence (World Bank 2020). Major droughts hit the country in 2000, 2002/3, 2006, 2008/9, 2010/11, 2015/16. The latest, which affected the whole of the Horn of Africa, started in 2020 and lasted until 2023, making it one of the region’s most prolonged and severe droughts in modern history. Climatic pressures on agricultural production have significantly impacted food security, including pushing up food prices in urban areas and contributing to increasing rates of urban food poverty (Agazhi and Mada 2025). Beyond agricultural and food security, climate shocks have also impacted the availability of drinking water, the incidence of climate-related diseases, damage to infrastructure, land degradation and challenges to the business operating environment (Teku and Eshety 2024). 

Cycles of conflict have erupted across the country in recent years, with populations vulnerable to poverty often at the front line. Over 3 million people were identified as internally displaced across Ethiopia, and the leading reason given for displacement was conflict (International Organization for Migration 2024). The conflict that erupted in Tigray in 2020 is estimated to have led to a 46% loss in household incomes in the region that year (World Bank 2024). 

Meanwhile, Ethiopia has been one of the fastest-growing economies in the world for the last two decades, with GDP growth of over 10% for much of the last 10 years (World Bank n.d.). Indices of pro-poor growth present a mixed picture across the country. Using LSMS data covering 2018/19 and 2021/22, Goshu, Mehare and Tariku (2024) estimate that growth was pro-poor in rural areas but not urban areas. Public expenditure on pro-poor sectors, including health, education, agriculture and rural development, has increased. In 2024/25, about 32% of the federal budget was allocated to pro-poor sectors, including education, health, road construction, water, energy and agriculture. However, the budget share for these sectors has been on a downward trend since 2022/23 – a shift that contrasts with the pattern observed in previous years.

An exceptional increase in primary school enrolment in rural areas was one of the country’s landmark achievements at the turn of the century.

Public spending is decentralised and distributions vary by region. Gambella had the highest pro-poor public expenditure in 2016 and is also the region with one of the largest decreases in poverty between 2011 and 2016, while Oromia had one of the lowest rates of pro-poor public expenditure and a much lower rate of poverty reduction over the period (World Bank 2020). However, since 2022/23, the composition of the federal budget has shifted toward a larger share of recurrent expenditure, forecast to exceed 60% in the 2024/25 fiscal year (UNICEF 2024). This reduction in growth-promoting capital expenditure may negatively affect long-term economic development. 

Rural development, particularly in agriculture and education, has been a central feature of the government’s growth strategy. Former Prime Minister Hailemariam Desalegn emphasised the importance of rural development, stating, ‘Many African countries are a failure because they neglect the rural economy, especially the agriculture sector… We tried our best to bring about technological changes in our agricultural sector. You should educate the sons and daughters of the rural community. They are the ones who are going to take after us’ (African Leadership Magazine 2020, 17 August). An exceptional increase in primary school enrolment in rural areas was one of the country’s landmark achievements at the turn of the century. During the 1990s and early 2000s, Ethiopia achieved the fastest increase in primary enrolment of any African country (Lenhardt et al. 2015). Secondary enrolment has been slower, and returns to education remain a concern. However, these achievements have contributed to increased human capital and have the potential to convert to improved livelihood opportunities. 

An Ethiopian woman sells crops in a local crowded market. Jimma, Ethiopia

2. Distribution of power and responsibilities for poverty reduction policy

2.1 Central government 

Ethiopia’s 1995 constitution introduced an ethnic-based federalist system aimed at accommodating the nation’s diverse ethnic composition. The constitution has provisions for decentralised decision-making across the different administrative regions based on the principle of self-determination. However, decision-making remains highly centralised (Gebeye 2023). 

As chief executive, the prime minister is at the centre of policy implementation and the focal point of many lobbying efforts. However, direct influence on the prime minister is limited due to the hierarchical nature of the decentralised administration. Most domestic actors advocate towards their respective ethnic groups or regional representatives who form part of a patron-client system that rewards loyalty (Bertelsmann Stiftung 2024). 

The deputy prime minister also plays active role in the implementation of policies and strategies, particularly in the design and implementation of Ethiopia’s flagship Productive Safety Net Programme (PSNP). Chief economic advisors provide both the prime minister and deputy prime minister with strategic, political and financial advice. 

2.2 Cabinet and government ministries 

Most policy and strategic priorities are initiated at the executive level, and the role of house representatives is essentially to debate and approve these. Within the cabinet, the Ministry of Finance (MoF) and Ministry of Planning and Development are influential in policies and strategies relating to poverty reduction. The influence of these institutions has grown in recent years, while other ministries have been more focused on implementing sectoral policies. 

While the executive – and to a lesser extent, MoF – hold much of the power to decide strategic priorities for the country and are challenging to influence from outside, these other ministries can be good audiences for evidence and policy advice on poverty reduction. They are responsible for effective policy implementation and can be more open to external inputs to enable this. Ministries responsible for implementing poverty reduction programmes include the Ministry of Agriculture, the Ministry of Labour and Skills, the Ministry of Women and Social Affairs, the Ministry of Education and the Ministry of Health. 

2.3 Civil service 

The civil service has undergone constant restructuring and reforms to improve efficiency. Corruption and unethical practices have been longstanding concerns, and civil servants’ neutrality in enacting public policies has been a problem due to the politicisation and patronage systems operating throughout the country’s governance system (Legesse, Ahmed and Wudeh 2019). 

Like other dimensions of the public system in Ethiopia, the civil service is highly centralised and federal organisations are more effectively organised than at the regional levels (World Bank 2018). There is variation in effectiveness across government sectors, with education standing out as the best-managed sector (World Bank 2018). According to the World Bank, ‘Little discretion is afforded to officers to carry out their assignments on a day-to-day basis. Staff contributions towards decisions on how to carry out tasks, as well as in the implementation of policy is infrequent and done in an ad-hoc manner’ (2018, p.41). 

2.4 Decentralisation 

Ethiopia has been transitioning to a more decentralised governance structure since 1991. This involves extending autonomy around budgetary and policy decisions to regional and city administrations. Administrative decentralisation in Ethiopia involves regional states (kilil) that enjoy significant autonomy. Each region has its own constitution, legislative council and executive body. It also entails fiscal decentralisation, with each regional state receiving block grants from the federal government. However, own-source revenue – such as local taxes and fees – remains limited. Notably, budget autonomy at the woreda level has expanded since the early 2000s, enhancing local control over planning and service delivery. This decentralisation includes affirmative action for regions with higher poverty rates, including higher budgetary allocations and preferential access to higher education (Faguet, Khan and Kanth 2019). Several studies have found that this affirmative action towards poorer regions has accelerated progress in social sectors and enabled residents in these regions to be more involved in regional government administration (Faguet, Khan and Kanth 2019). 

Decentralisation has been partial, and the central government maintains significant control over resource allocations and policy priorities. Patronage systems persist at these regional levels. However, regional administrations may be more open to incorporating evidence and policy advice. Their proximity to people affected by poverty-related policies also makes them promising outlets for this evidence due to their responsibilities and accountabilities for service delivery. 

2.5 Development partners 

Bilateral and multilateral development partners have played an active role in poverty-related policy formation and financing for decades. Throughout the 1990s and 2000s, aid comprised a significant proportion of the government’s budget. Assistance peaked at 19% of GNI in 2003, and was above 10% for most of the 20-year period (World Bank n.d.). Aid as a proportion of GNI has declined since 2010 and was down to 4% in 2022 (World Bank 2025). The government has held a strong, independent role in poverty-related policy even during periods of high incoming aid. Still, these development partners are a good outlet for policy evidence and advice. 

Aside from approaching these partners directly, the Development Partners Group (DPG) in Ethiopia is a good outlet for policy advice. The group was formed in 2001 to ‘facilitate engagement and policy dialogue among development partners and with the Government of Ethiopia and other stakeholders’ (DPG 2025). DPG comprises 35 bilateral and multilateral institutions that meet regularly and review the national development annually. It has working groups that aim to align priorities and advice across sectors. 

2.6 Civil society and academia 

Civic space has long been restricted in Ethiopia and recent government activities suggest the government intends to limit it further. The 2019 Civil Society Organizations Proclamation No. 1113/2019 established the Authority for Civil Society Organizations (ACSO), which now has the mandate to regulate civil society organisations. Since its inception, ASCO has suspended numerous established organisations, including the Ethiopian Human Rights Council – the country’s longest-standing human rights organisation (Human Rights Watch 2025, 29 January). 

Ethiopia has a vibrant research culture with some of the world’s leading poverty experts. Many domestic research institutions are feeding into national and regional policy discourse and informing public debate on poverty and poverty reduction. 

2.7 Media 

This constrained civic space in Ethiopia is mirrored in the media environment. State media is closely linked to the ruling party’s narrative and independent journalists have experienced government pressure, arrest without charge and violence (Freedom House n.d.). The Ethiopian Human Rights Defenders Center (EHDRC) has reported ‘escalating pressure on journalists, including arbitrary arrests, intimidation, threats, and forced self-censorship’ (Freedom House n.d.). Some progress has been reported in opening up media space under the current leadership. More than 200 previously banned media outlets have been authorised to operate since Prime Minister Abiy Ahmed took power (Reporters Without Borders (RSF) n.d.). 

3. Politics and elections

The Ethiopian People’s Revolutionary Democratic Front (EPRDF) governed the country from 1991 until the party’s dissolution in 2019 The party’s agenda shaped policymaking relating to poverty for over three decades. Its ideology was rooted in its history of revolution and Marxist-Leninism. Its governance approach was founded around the concept of ‘revolutionary democracy’. Democracy in Ethiopia is based on collective communal participation with consensus-based decision making as opposed to a more liberal approach based on individual participation (Brown and Teshome 2007). 

In 2019 the current regime introduced governance reforms aimed at liberalising the country’s political and economic systems. These included ideological shifts away from the EPRDF’s Marxist-Leninist foundations and the developmental state model that had guided the country for decades. As part of this reform agenda, the concept of Medemer – an Amharic term meaning ‘coming together’ – was introduced to promote a pan-Ethiopian democracy shaped by the country’s culture, consciousness and values (Bertelsmann Stiftung 2024, p. 4). The three pillars of this governance approach are national unity, citizen dignity and prosperity. These ideological reforms have been associated with the conflict that broke out in the Tigray region in 2020 (Bertelsmann Stiftung 2024, p.4). This and other regional conflicts that have since broken out, and opposition from different parts of the country, have stalled planned political reforms (Freedom House n.d.). Unlike the EPRDF regime, the current government does not follow a clearly defined ideology but instead adopts pragmatism as its guiding principle. 

Ethiopia holds elections for the House of Peoples’ Representatives every five years. Regional elections occur within the same cycle but the dates vary based on logistical factors and security risks. Members of the House elect the Prime Minister. The next election is planned for 2026. International observers rank political competition in Ethiopia as very low. The incumbent party has secured over 95% of parliamentary seats in all elections but one (2005), including the recent election, in which EPRDF secured nearly 97% of seats (Yimenu 2025, 15 April). There are frequent reports of harassment, detention and other restrictions on members of opposition parties (Freedom House n.d.). 

4. Selected policies relating to poverty reduction

Poverty reduction has been a central focus of successive national government strategies. These included the Sustainable Development for Poverty Reduction Program (SDPRP, 2000–2004), the Plan for Accelerated and Sustained Development to End Poverty (PASDEP, 2005/6–2009/10), and the Growth and Transformation Plans: GTP I ( 2010/11–2014/15) and GTP II (2015/16–2019/2020). Since 2018, the government has adopted the Ten-Year Development Plan (2021–2030) along with two phases of the Homegrown Economic Reform Program: HGER 1.0 (2019/2020–2022/23) and HGER 2.0 (2023/24–2025/26). In particular, HGER 2.0 entails a series of reforms aimed at raising living standards and reducing poverty and vulnerability by promoting inclusive, sustainable economic growth, job creation and improved income for citizens. Many sectoral policies incorporate poverty reduction priorities from these strategies and are monitored as priority outcomes from the government’s broader development efforts. 

4.1 Social protection 

Social protection is a cornerstone of the government’s poverty reduction policy efforts. HGER 2.0 also underscores the central role of PSNP in protecting livelihoods – especially given the high levels of poverty and vulnerability amid multiple, overlapping shocks. It aims to reform PSNP to improve the adequacy, coverage and sustainability of safety net spending in both rural and urban areas. The latest social protection strategy, from 2016, commits the government to: 

• conditional and unconditional cash and food transfers (depending on the target group, availability and quality of services available) 
• livelihoods and employment support to improve on- and off-farm income-generating activities 
• fee waivers for health and education services, subsidised health insurance and specialised services for people with disabilities 
• legal protection and support for citizens exposed to abuse, exploitation and violence (adapted from International Labour Organization (ILO) 2021). 

The main instrument of the PSNP provides cash and food to families living in poverty in return for public works. There are additional benefits that beneficiaries can receive. 

Social protection is an area where the government, bilateral and multilateral donors have cooperated and invested for the last 20 years. Ethiopia’s PSNP – one of the largest social protection programmes in the world in terms of number of beneficiaries – emerged from an agreement in 2005 to avoid annual appeals for aid in response to chronic food insecurity (Berhane et al. 2014). Rural areas are the programme’s primary focus; however, some urban components have been introduced recently. 

Ethiopia’s PSNP has been subject to criticism and is frequently the subject of debate domestically and among development partners, who fund 58% of the programme (World Bank 2017). While the programme has been credited with increasing household resilience to shocks, particularly in terms of food security, the size of payments are too small and their duration is too short to enable escapes from poverty (Berhane et al. 2014; Mariotti and Diwakar 2016). Distribution and targeting have been concerns, though marginalised regions have generally been prioritised. The programme’s financial sustainability is frequently threatened, partly because it relies on external support. Recent cuts to development assistance from the US and the UK have brought those concerns to a head over the last year. Ethiopia saw the third-highest cut in development assistance from USAID’s recent funding changes – a loss of US$387 million in bilateral funding (Sandefur and Kenny 2025, 26 March). 

Despite these critiques, Ethiopia’s PSNP will likely remain a key poverty reduction policy instrument. Given its direct relationship with poverty reduction, significant research and policy advice are targeted at this area. Moreover, programme implementers have been receptive to advice. For example, the fourth phase of PSNP introduced an annual review of the purchasing power of PSNP transfers and adopted recommendations on how the wage rate should be adjusted (Mariotti and Diwakar 2016). 

4.2 Land policy 

Land policy directly affects livelihoods in Ethiopia and is linked to poverty reduction efforts. Ethiopia has a troubled history with land resettlement policies, and land assets and tenure laws have left many households with precarious relationships to their land. The state has held exclusive land rights since 1976, with rural households assigned user rights to cultivate (Dercon and Ayalew 2007). Government commitments have been made since the early 1990s to strengthen individual land rights but progress has been slow (Dercon and Ayalew 2007). A key change in the 1995 constitution resulted in the devolution of land administration and natural resources to regional governments. While the federal government still holds legal tenure, regions can lease the land. The reforms also opened the space for perpetual use rights for farmers, which have been allocated with some success in regions such as Tigray (Rampa and Lovo 2023). 

4.3 Climate policies and international green finance 

In 2011, the government developed the Climate-Resilient Green Economy Strategy (CRGE) and coordinated its implementation through the then Environmental Protection Authority. The policy aims to reduce greenhouse gas emissions and increase climate resilience. The strategy has three broad objectives: (1) attracting international climate finance with an emphasis on greenhouse gas abatement; (2) seizing opportunities for innovation based on the latest production platforms – ‘leapfrogging’ to the newest and best technology; (3) creating competitive advantage out of sustainable use of resources and improving their 

productivity (Federal Democratic Republic of Ethiopia 2011). The agricultural sector, where most of Ethiopia’s greenhouse gases are released and where climate resilience is critical to smallholder farmers living in poverty, is a pivotal part of this strategy. In light of the strong links between climate resilience and poverty, this strategy plays an essential role in the poverty-related policy space in Ethiopia. 

5. Conclusion

Poverty reduction is woven into the fabric of Ethiopia’s policy landscape. Successive governments have prioritised poverty reduction, while sectoral plans and regional policy implementation often intersect with these poverty-related priorities. Research and evidence to support these strategies will be instrumental in helping the country maintain the rate of poverty reduction seen in the last three decades. 

Governance is highly centralised in Ethiopia, and the central government is inaccessible for most academics and civic actors seeking to advise or advocate on poverty reduction strategies. However, channels closer to the level of implementation are more receptive to advice. Ministries responsible for poverty-related policy implementation – such as the Ministry of Agriculture and the Ministry of Women and Social Affairs – are good targets for evidence and policy advice. 

Bilateral and multilateral donors are also heavily involved in poverty reduction activities in Ethiopia and are often receptive to evidence. Research led or supported by Ethiopian scholars and civic actors is also highly valuable for external actors needing contextualised and timely evidence. The breadth and depth of poverty-related knowledge will be crucial to maintaining progress on eliminating poverty in the country. 

Civic and media space is limited, restricting public debate and scrutiny of poverty reduction strategies. Researchers can help fill the public representation gap by collecting and communicating evidence from average citizens, particularly the marginalised voices of people living in poverty. However, this does not replace the meaningful public debate critical to ensuring local people’s experiences are reflected in the policies that affect them.