The Economic System of Ethiopia: An Analysis

What is the economic system of Ethiopia? The economy of Ethiopia is based on a mixed economy. The country’s economic system combines elements of a market economy and a planned economy.

In Ethiopia, the economy comprises a private sector, consisting of individuals and businesses that make autonomous decisions based on self-interest, and a public sector, where the state determines the production and distribution of specific goods and services. No country is purely capitalist or purely communist.

What do the freedom indexes tell about the economic system of Ethiopia?

To determine if a country is mostly a market economy or a planned economy, it is useful to examine some economic indexes. For instance, according to the 2022 Index of Economic Freedom, which measures the ability of every human to control his own labor and property, Ethiopia is ranked 150th globally and 35th in Sub-Saharan Africa indicating that the country has a repressed economy.

In a similar way, the 2022 Freedom House index evaluates the state of political rights and civil liberties globally. Generally, market economies tend to align more with democracy and freedom, while command economies tend to be characterized by greater state control and fewer democratic and civil liberty protections.

Ethiopia gets a score of 23/100, which qualifies it as Not Free. Ethiopia is a country where the government controls what people do for political reasons, and people have limited freedom to choose (what, how much, and how to produce, whether to buy or not, selling price, etc.)

The Link Between Public Sector Employment and the Economic System of Ethiopia

An indicator of the extent to which the State is involved in the economy is the number of public sector employees. In Ethiopia, according to ILOSTAT, the number of public sector employees as a percentage of the total workforce is 6.6% (2021).

In the country’s mixed economy, the number of public sector employees as a percentage of the total workforce varies based on the specific policies and practices adopted by the State. Some economic activities are left to the private sector while others are under government control. The bigger the public sector the closer is the economy to being a command economy.

What does the biggest company in Ethiopia say about the country’s economic system

The biggest company in Ethiopia should also be looked at, as well as whether it is a state-owned or private company. In this case, Ethiopian Airlines is a mixed private-public sector company from Ethiopia. It is owned by the Ethiopian government but also has private shareholders.

The historical factors that have influenced the economic system of Ethiopia

The current mixed economy system of Ethiopia in the last century is a result of a combination of factors, including the country’s colonial history, its political and economic reforms, and its efforts to promote economic growth and development.

Ethiopia’s colonial history has left a legacy of state-led economic development, while its political reforms have enabled the country to open up to foreign investment and create a more open and competitive market.

Additionally, Ethiopia has implemented various economic policies to promote economic growth and development, such as the privatization of state-owned enterprises, the liberalization of trade, and the promotion of foreign direct investment. All of these factors have contributed to the current mixed economy system of Ethiopia.


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One response to “The Economic System of Ethiopia: An Analysis”

  1. Nageessoo Avatar

    Choose the economic system that is more relevant to the Ethiopian economy today and explain why it is so

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