After years of civil war and the subsequent border war with Eritrea, Ethiopia remains one of Africa's poorest states, with a very low income per capita and a population that is almost two-thirds illiterate. Nearly half the population of Ethiopia is without access to healthcare.
The agricultural sector has suffered from frequent drought and poor cultivation practices. A devastating drought in 2003 led to widespread malnutrition and diarrhoeal disease, and resulted in more than 13 million people becoming dependent on international agencies for food.
Ethiopia is one of the least developed countries in the world with an estimated per capita income of US$100 or US$720, in purchasing power parity terms, in 2005. Poverty is pervasive with 47% of the population estimated to live below the poverty line. The UNDP Human Development Index (HDI) for 2007 (published in 2009) ranks Ethiopia 171 out of 182 countries and is said to have an index of 0.414. When adjusted for gender differences, the HDI in Ethiopia drops slightly to 0.403, reflecting some gender inequality.
The HDI measures, within one composite index, achievements (or lack thereof) in human development. It is calculated out of 1 and includes life expectancy at birth (54.7 years in the case of Ethiopia), adult literacy (35.9%), school enrolment rates (49.0%) and adjusted per capita income in terms of purchasing power parity (US$779). To the extent that it is less than 1, the HDI reflects the shortfall in human development in Ethiopia, confirming that poverty is extensive.
The HDI measures the average progress of a country in human development. The Human Poverty Index for developing countries (HPI-1) focuses on the proportion of people below a threshold level in the same dimensions of human development as the human development index - living a long and healthy life, having access to education, and a decent standard of living. By looking beyond income deprivation, the HPI-1 represents a multi-dimensional alternative to the $1 a day (purchasing power parity [PPP] US$) poverty measure.
The HPI-1 value of 50.9 for Ethiopia, ranks the country 130th among 135 developing countries for which the index has been calculated.
The HPI-1 measures severe deprivation in health by the proportion of people who are not expected to survive age 40 (27.7% for Ethiopia). Education is measured by the adult illiteracy rate (64.1%). A decent standard of living is measured by the un-weighted average of people without access to an improved water source (58%) and the proportion of children under age 5 who are underweight for their age (38%).
The HDI measures average achievements in a country, but it does not incorporate the degree of gender imbalance in these achievements. The gender-related development index (GDI), introduced in Human Development Report 1995, measures achievements in the same dimensions using the same indicators as the HDI but captures inequalities in achievement between women and men. It is simply the HDI adjusted downward for gender inequality. The greater the gender disparity in basic human development, the lower is a country's GDI relative to its HDI.
Ethiopia's GDI value, 0.403, should be compared to its HDI value of 0.414. Its GDI value is 97.3% of its HDI value. Out of the 155 countries with both HDI and GDI values, 132 countries have a better ratio than Ethiopia's.
Economic Reform Programme
The Ethiopian Government has begun implementing a comprehensive economic reform programme over the past decade. This has had an important bearing on developments in the health sector. Prior to 1991, economic policy was characterised by extensive government controls, macro-economic imbalances and restriction on private sector initiative, all of which resulted in low economic activity and persistent declines in economic growth.
With a change of government in May 1991, new economic measures were put in place to create a free market economy and redirect government interventions to social and infrastructure development. In particular, health and education service delivery and investment in roads and water resources development were given prominence. Starting with the Transitional Period Economic Policy, successive Recovery and Structural Adjustment Programs, underpinned by a series of Policy Framework Papers (PFPs) agreed with the World Bank and the International Monetary Fund (IMF), were put in place to stabilise and liberalise the economy and promote private sector participation.
The reform programme has resulted in improved economic performance. Macro-economic stability was attained and persistent declines in GDP reversed. Real GDP grew by an average of 5.8% p.a. in the period covering 1992/93- 2001/02. Seen against a population growth rate of 2.7% p.a. over the same period, this is a significant achievement. However, year-on-year changes were affected by external factors including the conflict with Eritrea and drought. Between 1998 and 2000 GDP growth was slowed by the conflict with Eritrea and in 2003 there was a sharp decline to a negative rate because of drought. There has been a strong rebound since then with a real GDP growth rate of 11.6% in 2003/04. The economy recovered from the exceptionally poor performances of the previous two years due to good agricultural performance.
The policy environment created by the economic reform and macro economic stability and growth helped to address poverty comprehensively through the adoption of the Sustainable Development and Poverty Reduction Program (SDPRP), which is now instrumental in prioritising poverty-related health programme targets. The Government also aims to meet targets set by global initiatives, notably the Millennium Development Goals (MDG) and the recommendations of the WHO Commission on Macroeconomics and Health (CMH) aimed at strengthening the link between improved health and economic development.
A marked feature of the reform is the stated commitment to shift the composition of government expenditures in favour of social and economic infrastructure. Accordingly, allocations to the health sector rose from around 3% to 6% from 1991 to 1997. During the first phase of the country's Health Sector Development Plan, the share of the health sector was held at around 5-6% of total Government budget allocations despite the expansion in defence expenditures due to the war with Eritrea. Public expenditure on health as a percentage of GDP is 1.9%, with total health spending estimated at 5.6% of GDP. Recent increases in government spending on health were complemented by fiscal decentralisation and broad reforms in the administration and management of public finance.
Although spending on health (both public and private) increased from US$ 4 to US$ 5.60 per capita, this is very low level compared to levels in some other SSA countries, e.g. Kenya (US$31), Uganda (US$18) and Tanzania (US $ 8). Meeting the targets set by the CMH and for meeting the MDGs (about US$34 per capita) calls for substantial increases of the present levels of spending on health.