I.                  Political Background to the 1991 upheaval

Until July 1991, natives and foreigners alike had viewed Ethiopia as the mythological Pandora’s Box of many unknowns. Such misgivings were accentuated by the official propaganda of the Derg and the conflicting views of different movements, some of which had been locked in armed struggle and polemical battles with one another for years. As a consequence of this atmosphere of conflict and political acrimony, people could not even theoretically contemplate which regime might be worth their while.

In part, this explains the early withdrawal of people from politics and their general lack of trust in public institutions or political organisations. There was a sense of social and political fragmentation felt and expressed by most Ethiopians. Regardless of their role in politics, people were genuinely apprehensive about what the new change might bring with it. Underlying such misgivings was the fear of a repeat of the blood-letting and horror which followed the 1974 upheaval and the chilling story of how the bloodless revolution turned into a series of nightmarish episodes which claimed the lives of several thousands.¹ 

Events leading to the overthrow of the Derg   

After six decades of effective rule as Regent, Crown Prince (1916-30) and Emperor (1930-74), Haile Selassie’s rule came to an abrupt end in 1974. The collapse of the empire was caused by many forces but brought to a head by the revelation of government indifference to the Wollo famine of 1972-74 which claimed more than 200,000 lives.

In January 1974, a wave of civil unrests led by teachers, students and taxi-drivers, and subsequently aided by mutinies in the armed forces, culminated in the resignation of the erst­while Prime Minister. This reached its grand finale with the removal and presumed execution of the Emperor in September 1974. At this critical juncture, what began as a popular revo­lution by the people degenerated into a coup by armed forces.

The deposition of the Emperor was followed by three years (1974-77) of acute conflict ranging from labour strikes and urban unrest to military mutinies which were contained through draconian measures of military reprisal. The period also witnessed the rise and speedy disappearance of prominent members of the Derg or the Provisional Military Administrative Council (PMAC) and a heavy toll of civilian casualties during the “white” and “red” terrors.²

The rise and gradual consolidation of the position of Colonel Mengistu H/mariam was consummated in three stages. First came the removal of the royal dynasty and political aristocracy linked with the Empire. This move was carried out through the summary execution of 60 senior officials of the old regime and the subsequent killings and arrests of genuine and presumed supporters of the old regime.

The second act was the execution of prominent members of the Derg. The first non-monarch head of state, General Aman Andom, was killed in November 1974, and the second one, General Teferri Benti, in February 1977. In November of the same year the first vice-chairman of the PMAC was murdered. This effectively sealed off the chapter of internal conflict and paved the avenue for 14 years (1978-91) of autocratic rule under Col. Mengistu. 

But the third and final act which replaced the fading dream of democracy in Ethiopia with the grim and inevitable reality of military dictatorship and the rule of Col. Mengistu, was the powerful but ideologically farcical division of the Ethiopian leftist elite who played into the hands of the Derg. 

As the division of the left deepened and degenerated into random killings of its supporters, the PMAC responded with ferocious vindictiveness and used this pretext to stamp out even the most remotely suspected opponents of the junta. In the wake of the bitter power feud which saw the emergence of the white and red terrors, it is conservatively estimated that more than 100,000 educated Ethiopians were decimated while several hundreds of thousands more were forced to flee the country to settle in Europe, the U.S. and in countries around the region. 

Ironic as it may sound, in the ultimate act of the power craze of 1977-1978, what remained of the Derg under Mengistu exterminated the intellectuals who had sided with it and put itself on the saddle of power. For a while, this gave the impression that the business of settling old scores was over, but the enigma which was to haunt the regime remained.³

The Birth of a “Republic” During the Derg Era  

The period 1979-84 was devoted to the process of reconstituting the Workers Party of Ethiopia (WPE) based on the model of the Communist Party of the USSR. At the end of the first decade (1974-84), the Workers Party of Ethiopia was created with Mengistu as its General Secretary. Following this act, the People's Democratic Republic of Ethiopia (PDRE) was established in 1987. It appeared then that the legal and institutional process of consolidating Mengistu’s hold to power was theoretically over. But, as it turned out, even the painstaking process of the edification of the state did not bring peace and stability to the country. In fact, it was the pompous parades and extravagant celebra­tions of 1984-85, which contrasted with the horrid spectacles of starving people in Wollo and Tigray, that signalled the beginning of the regime’s inevitable disintegration.⁴ 

The PDRE Years (1987-91) 

Right from the outset, the PDRE was greeted by a sceptre of massive starvations. Thus, the regime was preoccupied with the business of managing the crisis precipitated by the new famine. As a result, other developmental activities were abandoned throughout 1985 and 1986. Making matters worse, 1987 also became another year of drought. Besides, the years after 1987 saw a gradual escalation of the nationalities conflict in Tigray and Eritrea. This was exacerbated by the regime’s inability to start dialogue at home and a conspiracy of a host of international factors which militated against it abroad.

Domestically, by choosing not to seek meaningful dialogue with the opposition, the regime torpedoed its regional-cum-nationality reform program which was destined to fail without the approval of all interested parties. By brushing aside the nationalities movements in particular, it dissipated the bona fide goodwill for compromise which the opposition had showed until then. This removed the ball of initiative from its court and consigned it to that of the opposition which kept it until 1991. Through this act of neglect and disregard, the regime virtually signed its capitulation warrant four years before the event.

Internationally, with the rise to power of Mikhael Gorbachov in the USSR, which led to an East-West rapprochement, Mengistu was deprived of a powerful ally and his only source of arms. This, coupled with the series of humiliating defeats which the regime sustained until May 1991, made its collapse merely a matter of time.⁵ 

The Political Mood before the Departure of Col. Mengistu  

Against the above background of tension and uncertainty, few Ethiopians believed that the country would ever gravitate toward some form of ethnic or national federalism or a political denouement along such lines. Even when the hope of democracy crossed the minds of some, very few really believed that it would materialise. In fact, for many, such a reflection was a luxurious diversion from the harsh reality of repression.

This might explain why Ethiopians were apprehen­sive about the prospects of change. But then, why were they so pessimistic? Anyone who even sporadically witnessed the agony of war and famine which visited most Ethiopian homes would understand and fully appreciate why people took such a dim view of life. People’s expectations of peace and prosperity under a socialist order had been shattered. Nearly all the promises pledged to them by the Derg in the wake of the 1974 upheaval had not been delivered. Yet, the memory of the boisterous demonstrations and the loud rhetoric of the period remained vivid in their minds.⁶

Their lack of confidence was also heightened by the brutality of the military regime which afflicted a broad cross-section of the society. The regime had humiliated the Amharas and stripped them of their dynastic credentials by liquidating the Emperor and his aristocracy. It co-opted the Oromos only to throw them away later. It never really understood the Tigray region and its people where it inadvertently promoted an insurgency movement which turned out to be the regime’s Achilles’ heel.

Nevertheless, despite public disappointment with the Mengistu regime, people did not know what to expect of the EPRDF which had already been projected as a move­ment which emulated Albanian Socialism. There were also those who feared the notion of Tigrian domination which was effectively circulated by Mengistu to canvass Amhara and Oromo support for his government. Yet, this negative attitude was to prove unfavourable to the regime and its coalition.

However despite the adverse propaganda of the Derg, the movement (TPLF) which soon formed league with the OLF and other organisations was favoured by three factors. First, people were happy that the war was finally over and that their children did not have to be sacrificial lambs. Second, there was a longing among many for democracy. The third crucial factor was the international approval which the EPRDF, OLF and EPLF received in London and the speed with which the EPRDF restored calm and order in the country.

The image of the EPRDF was also somewhat redressed by a more positive media coverage. But, by far the most crucial agenda which enhanced the position of the new government led by the EPRDF were the proposals tabled at the nationalities convention  held in Addis Ababa from July 1-5, 1991. This became a convergence point for nationality movements and political organisations of various shades and hues. More than twenty nationality movements and other political organisations including the OLF, ALF, Somali, Isa Gurgura, ENDO, EDU and others were represented. Surprisingly enough, too, nearly all of the issues tabled by the EPRDF were debated and subsequently adopted by the movements.⁷ 

II.               The New Political Landscape of the EPRDF  

Since the May 1991 upheaval, a number of cardinal events which have won admiration in many international circles and provoked anxiety in others have taken place. As observed above, least controversial of all was the man­ner in which normal life was restored in Addis after days of looting and chaos, and the formation of an interim govern­ment which made preparations for the July convention.

At the July convention, the debate, which involved virtually all Ethiopian nations and nationality movements, mainly focused on the following issues:

1.      The formation of a multinational parliament;

2.      The creation of a transitional government and a multina­tional cabinet;

3.      A new regional and administrative division of the country based on language and nationality;

4.      A new policy designed to replace the previous command economic planning with one which gives greater freedom to the private sector;

5.      Political pluralism which has, to date, led to the formation of nearly ninety political parties;

6.      Other activities which have laid down the basis for democratic election including the rights, obligations and requirements of citizens who may elect and/or be elected; and

7.      The holding of regional elections aimed to pave the way for the nation-wide election scheduled for 1993.⁸

The debate on these issues and the resolutions reached on some of them are, as we shall see later, significant milestones on the bumpy road toward the creation of democratic institutions. Nevertheless, one should also take cognizance of the fact that the avenue toward realising them has not been entirely smooth. For instance, the lively democratic debate has at times alternated with a temptation to switch back to arms.

The above, given the complexity of Ethiopia’s multi­na­tional composition and its historically nurtured con­flicts, is scarcely surprising. In fact, it was long overdue and is of paramount value for promoting a democratic tradition. This exercise is of great value in a traditional society like Ethiopia where even the educated in modern garb continue to imbibe anachro­nistic feudal values condemning ethnicism in one breath and preaching the same gospel in another.⁹

Economic Development as a measure of enhancing Human Rights  

Having extricated itself from the pincer-grip of three decades of internal strife, misguided policies and elitist control, Ethiopia at present seems firmly committed to the onerous task of reconstruction and development. This commit­ment is buttressed by the country's recently promulgated socio-economic and political decrees, aimed to steer the country away from the grip of the totalitarian regimenta­tion which had previously choked economic growth. The decrees are also aimed to free the creative potential of economic regeneration and social innovation.¹⁰

Fortunately for the war-fatigued country, the decrees have been matched by a commitment to pragmatism and a dedication to their implementation. The result of this has been notable for the improvement in the quality of life of a large segment of the Ethiopian population.

The latest proof of this commitment is Ethiopia's temporary attainment of self-sufficiency in food production. This happened in 1996/97 ahead of the projected target date by a decade. Nevertheless, this might be difficult to sustain as agriculture is, to a large measure, dependent on rain fall which is generally erratic. Moreover, the failure of rain has often led to drought and famine in parts of the country as was the case in 1999/2000.

One of the reasons for the drought is the effect of global climatic changes as is evidenced by the phenomenon of El Niňo and other factors which might lead to occasional bumper-harvests as was the case in 1996/97 which was a source of optimistic respite and of confidence in the future.

Ethiopia's positive development in agricultural produc­tion has had a salubrious immediate effect on eco­nomic growth and on other macro-economic indicators.                    

The 1996/97 bumper harvest had for instance led to a GDP growth of 10.2 percent in addition to the lowering of inflation to less than one percent, a steep rise in foreign exchange reserves, reduced budget deficit, increased investments and savings, all of which brought down government borrowings. This was also a harbinger of good news for overall macro-economic stabilisation.

However, according to informed analysts of the Ethiopian political economy, the positive developments are also partly attributed to the sweeping economic reforms introduced since 1992. The reforms included: the large-scale liberalisa­tion of the political economy bolstered by the devaluation of the Birr, interest rate adjustment, privatisation of state companies, and the investment code introduced up to 1998/99.

But even more important to the improved economic performance are the socio-economic reforms and political decentralisation by the EPRDF government. These positive trends were also reinforced by the decision of the new government to take a back seat by minimising state intervention and restricting its role to the task of co-ordination and facilitation.

The process of decentralisation basically resulted from the recognition of the value of power-sharing and reliance on the verdict of the ballot box. 

Milestones of the Transitional Phase of Reforms

According to the World Bank and IMF assessment, the positive trend of the first phase of the reform (1992/93–1994/95) had resulted in the following heartening pointers. During this period:

1.      The Birr was devalued by 58.6 percent in US dollar terms;

2.      An auction system was introduced to determine the exchange rate applicable to most transactions;

3.      Procedures for export and import licensing were streamlined;

4.      New interest rate structure was introduced and positive real rates of interest maintained;

5.      A number of tax policy reforms and other government revenue enhancement measures were introduced;

6.      Public expenditure was rationalised; public sector salaries were adjusted upwards and ceilings on public salaries were removed;

7.      The first public enterprises were sold;

8.      New investment, labour and public enterprise laws were enacted;

9.      Direct price controls were virtually eliminated, and internal marketing, transport, and trade were de-controlled;

10.              In the external area, restrictions on payments for invisible transactions were considerably liberalised; and

11.              The maximum tariff rate was reduced from 230 percent to 80 percent.

Similarly, the second phase of the reform (1994/95–1996/97) led to the following impressive results:

Ethiopia achieved a real average annual growth rate of 6.6 percent, and inflation averaged 8.2 percent during 1992/93–1994/95 as against 15.7 percent during the period 1989/90–1991/92. The overall fiscal deficit (excluding grants) averaged 8.9 percent and broad money growth averaged 17 percent during the same period. External current account deficit, excluding official transfers, averaged 6.0 percent of GDP. The overall balance of payments situation improved markedly and gross official reserves reached about 5.8 months of imports.

The second phase of economic policy reform was imple­mented during the period 1994/95–1996/97. The objectives of this phase of the program were to continue to revitalise the economy and to create a conducive environment for labour-intensive develop­ment, to limit the role of the government to selected economic services, to promote greater private sector activity and investment. These objectives were to be achieved by implementing the long-term develop­ment strategy of Agricultural Development-Led Industrialisa­tion (ADLI), mobilising external resource to rehabilitate and reconstruct economic and social infra­structures, and pursuing more liberal external trade and foreign exchange policies to improve the competitive­ness of the industrial and agricultural sectors.

Real economic growth slowed down from 6.2 percent in 1994/95 to 5.6 percent in 1996/97, with an exceptionally high growth rate of 10.6 percent in 1995/96; the inflation rate dropped from 13.4 percent in 1994/95 to negative 6.4 percent in 1996/97 and the value of exports rose by about 33 percent while imports grew by about 32 percent. Gross domestic investment rate rose to 19.1 percent of GDP from 16.4 percent in 1994/95, and the share of gross domestic saving to GDP increased from 7.4 percent to 8.7 percent during the same period. The ratio of govern­ment revenue to GDP went up form 17.4 percent to 19.2 percent, while that of expenditure declined from 24.8 percent to 24.3 percent. Thus, fiscal deficit (excluding grants) as a percent of GDP dropped from 7.3 percent to 4.9 percent. There were other improve­ments in the financial sector. For instance, “liquidity (broad money) slowed down from 24.3 percent to 3.4 percent. Despite this financial improvement, the overall balance of payments worsened and gross official re­serves decreased from 5.8 to 4.2 months of imports of goods and non-factor services during 1994/95–1996/97.”

The significance of the above results is further under­scored by most recent assessments. An August 1998 re­port of the IMF for instance lauded and cautioned Ethiopia for the positive impact of the past reform measures. GDP growth for that year was close to 6 percent. However, the report of the International Monetary Fund (IMF) also said that Ethiopia must get a grip on its finances to avoid squandering its economic progress of the earlier two years.

Praising the East African country’s “prudent macroeco­nomic policies,” the lending agency said it nevertheless was concerned about the expected widening trade gap caused by a global fall in the price of coffee–Ethiopia’s key export–and its effects on public spending.  It also expressed concern about the effect of the war with Eritrea where tens of thousands of soldiers have reportedly been killed in battles along the two nations’ 600-mile (1,000-km) border since May 1998.

Further, returning to the economic issue, it continued, “the main challenge facing the authorities now is to strengthen fis­cal discipline, notwithstanding the current spending pressures and the unfavourable external environment, so as to preserve the hard-won gains in macro-economic stabilisation.” The IMF said this in its annual review of the Ethiopian economy.

The report further advised the Ethiopian Govern­ment to improve tax collection, if need be by introducing new legislation and broadening the tax base.  The IMF urged Ethiopia to help secure its economic future by restarting talks with international donors, including the Washington-based agencies.

It went on to add, efforts to strengthen all aspects of transparency, including financing of military spending, would serve to enhance donor confidence. 

Other Reforms; Ensuring Food Security  

The other area of focus of the EPRDF (apart from macro economic issues), was agriculture and the achievement of food security. This was underscored by the fact that the country has numerous river basins with vast irrigable land which offer great potential for self sufficiency in food production and agricultural exports.  

The above optimism was further bolstered by Ethiopia's fertile soil and good climate which are suitable for agricultural development. It was also highlighted by the fact that Agriculture is a pivotal sector of the Ethiopian economy. It accounts for 50 percent of the GDP, 65 percent of total exports and 80-85 percent of all employment. Yet, the sector has for a long time being dominated by small-holding peasant farmers and a few state and commercial farms. 

As stated above, agriculture accounts for most of the export earnings. Until recently, coffee constituted up to 85 percent of the total agricultural export earnings.¹¹ In fact, as agriculture is the bedrock of the economy, the new Agricultural Development-Led Industrialization (ADLI) is also based on stimulating the agrarian sector. ADIL also aims to promote the broad-based development of the country. 

The importance of the agrarian sector which is hoped to be the basis of industrial development is also underpinned by the fact that it accounts for 50 percent of the GDP while the other 50 percent of comes from manufac­tur­ing, mining, tourism, trade, construc­tion and services. The industrial sector is as yet not well developed, accounting for only 12 percent of the GDP. It produces consumer goods for the domestic and international market.¹² The ADLI policy thus aims to promote industrializa­tion by domestically producing industrial inputs from the agricultural sector. At present, manufac­tured exports include: textiles, food stuff, tobacco, beverages, leather and leather products, canned and frozen meat, sugar, molasses, oil cakes, and metallic and non-metallic substances. 

Mining accounts for less than 1 percent of the GDP. Nevertheless, it is still an unexploited sector. Gold, copper, platinum, nickel, iron ore, coal, marble, potash, silica, lime­stone, diatomite could be exploited on a large-scale. Oil and natural gas are also available for exploitation. The new in­vest­ment code, with its various incentives, including tax holidays, has rekindled foreign interest in Ethiopia's minerals.¹³ 

Some Results of the Early Reforms 1992/93-96/97 

All in all, since the introduction of the new market-oriented economic policy in 1992, a number of policy measures and reforms have been undertaken. These include:

·        short-term economic stabilization and structural adjustment measures such as deregulation of domestic prices, abolition of export taxes and subsidies;

·        liberalization of foreign trade;

·         privatization of public enterprises; and

·        the promulgation of liberalized investment laws for the promotion and encouragement of domestic and foreign private investment.¹⁴

Due to these liberalization measures, the GDP (at current market price) rose from 20.8 billion Birr in 1991/92 to 41.1 billion Birr in 1996/97. Annual growth rate of GDP (at current factor cost) was on the average 7 percent, from 1991/92 to 1996/97.

Gross fixed domestic investment rose from 9.4 percent of GDP to 20.3 percent of GDP during the above years. Gross domestic savings grew from 3.0 percent of GDP to 9.4 percent of GDP during these years. The inflation rate dropped from its level of 21 percent in 1991/92 to less than 1 percent in 1996/97.¹⁵

Key Macro-Economic Indicators¹⁶

 Economic Trends in the Late 1990s 

In October 1996, Ethiopia entered a three-year ESAF (Enhanced Structural Adjustment Facility) arrange­ment with the IMF and embarked on the third phase of the reform program, which covered the period 1996/97–1998/99. Under this program, the government committed itself to reduce poverty by achieving broad-based economic growth in a stable macro-economic environment.¹⁷

The FDRE also lowered the maximum import tariff rates from 60 percent to 50 percent in December 1996 and eliminated the retail price control on fertiliser. But the first annual ESAF arrangement was extended to October 1997, because the IMF and the FDRE could not arrive at an understanding on a policy package which could cover the period 1997/98 and bring the program back to track.¹⁸ 

During the fiscal year 1997/98, the government introduced a financial service tax which unified the hitherto diversified taxes on coffee. It also began institu­tional reform of the Reve­nue and Customs Authorities to expedite revenue collection and enhance the tax administra­tion. On structural reform, the investment code was revised to allow foreign participation in the telecommu­nications and power sectors, and a foreclo­sure law was introduced. The economy achieved 0.5 percent real growth in 1997/98 (against 5.6 percent in the preceding year), because of adverse climatic conditions.

Nevertheless, there was little impact on food prices as the country had good food reserves and there was significant food aid. As a result, average inflation was kept at about 2.5 percent in 1997/98.¹⁹                                                    

Additional Reforms 

At the start of 1998, the FDRE concluded an agreement with the IMF to resume the program under the ESAF arrangement which also included an economic program for 1998/99 to be supported by a second annual ESAF arrangement. This was approved by the IMF Board in 1998. In line with this, Ethiopia forged ahead with its new structural and reform program of establishing its economy and reducing poverty. 

This program, which was designed to be imple­mented in the context of a medium-term strategy during the period 1998/99–2000/01, reflected a strong sense of ownership by the govern­ment of Ethiopia. During this period, the FDRE economic strat­egy was geared towards accelerated and equitable economic growth in an environment of macro-economic stability.²⁰

Ethiopia: Selected Macro-Economic Indicators (Million Birr) ²¹