With a per capita income of only about 20 percent of the African average, Ethiopia is one of the world’s poorest countries. More than 85 percent of the country’s population lives in rural areas, where agriculture is the main economic activity and where the poverty ratio is particularly high. In addition, stagnant agricultural growth, together with unpredicted droughts, has resulted in persistent food crises and food insecurity. Hence, any strategy for slashing Ethiopia’s poverty and hunger must focus on generating rapid and sustainable growth in the agricultural sector. To identify which kinds of investments have the greatest impact on agricultural growth, a deeper understanding of the linkages between agriculture, economic growth, and poverty reduction is needed.
This brief is based on a spatially disaggregated, economywide model that enables analysis of growth and poverty reduction linkages at national and regional levels from 2004 to 2015. The analysis considers the results for growth and poverty reduction of continuing with business as usual and of focusing on growth in four agricultural subsectors—staple crops, livestock, traditional exportables (coffee), and nontraditional exportables (selected fruits and vegetables, cotton, chat, sesame seed, sugar, and other horticultural products). The results of the model analysis reveal a number of conclusions for agricultural investment.