Ethiopia's Growth and Transformation Plan: A Computable General Equilibrium Analysis of Alternative Financing Options

32 Pages Posted: 14 Oct 2012

See all articles by Ermias Engeda

Ermias Engeda

International Food Policy Research Institute (IFPRI) - Consultative Group on International Agricultural Research (CGIAR)

Seneshaw Tamru

KU Leuven - Centre for Institutions and Economic Performance (LICOS)

Eyasu Tsehaye

International Food Policy Research Institute (IFPRI) - Consultative Group on International Agricultural Research (CGIAR)

Dario Debowicz

Global Development Institute, University of Manchester; Department of Economics

Paul Dorosh

International Food Policy Research Institute (IFPRI)

Sherman Robinson

International Food Policy Research Institute (IFPRI)

Date Written: November 13, 2011

Abstract

Under the Plan for Accelerated and Sustained Development to End Poverty (PASDEP), implemented from 2005/06 to 2009/10, Ethiopia achieved rapid economic growth and laid a foundation for future growth by making substantial investments in infrastructure and human capital. Regardless of the financing strategy, the high TFP and GDP growth rates under the GTP imply high average income growth for both poor and rich households, in both rural and urban areas. Because the GTP involves a greater concentration of investment in non-agricultural sectors than did PASDEP, growth of incomes of urban households is higher in the GTP than under PASDEP. Conversely, income growth of the rural poor is slightly lower under the medium growth scenario with domestic savings (10.0 percent) than under a continuation of PASDEP growth and investment (10.6 percent). Thus, this analysis shows that if the GTP investment and sectoral growth targets are achieved, real incomes of the poor in Ethiopia would rise substantially. The base simulations indicate that real incomes of the poor rose under PASDEP from 2005/06 to 2010/11. Under GTP, this real income growth would be accelerated, provided there is sufficient foreign savings or mobilization of domestic savings to achieve the targets. Nonetheless, the simulations also suggest that agricultural growth will still be crucial for raising incomes of Ethiopia’s rural poor. Thus, investments that raise agricultural productivity will need to continue in order to ensure that the rural poor share in the substantial projected benefits that would result from achieving the high economic growth targets of the GTP.

Keywords: Computable general equilibrium (CGE) model, Ethiopia

JEL Classification: D58

Suggested Citation

Engeda, Ermias and Tamru, Seneshaw and Tsehaye, Eyasu and Debowicz, Dario and Dorosh, Paul and Robinson, Sherman, Ethiopia's Growth and Transformation Plan: A Computable General Equilibrium Analysis of Alternative Financing Options (November 13, 2011). IFPRI Discussion Paper No. 30, Available at SSRN: https://ssrn.com/abstract=2161408 or http://dx.doi.org/10.2139/ssrn.2161408

Ermias Engeda (Contact Author)

International Food Policy Research Institute (IFPRI) - Consultative Group on International Agricultural Research (CGIAR) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

Seneshaw Tamru

KU Leuven - Centre for Institutions and Economic Performance (LICOS)

Waaistraat 6 - box 3511
Leuven, 3000
Belgium

Eyasu Tsehaye

International Food Policy Research Institute (IFPRI) - Consultative Group on International Agricultural Research (CGIAR) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

Dario Debowicz

Global Development Institute, University of Manchester ( email )

Oxford Road
Manchester
United Kingdom

Department of Economics ( email )

Haldane Building
Singleton Park
Swansea, SA2 8PP
United Kingdom

HOME PAGE: http://https://www.swansea.ac.uk/staff/som/econ/debowicz-d/

Paul Dorosh

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States
+1 202-862-5600 (Phone)
+1 202-467-4439 (Fax)

HOME PAGE: http://www.ifpri.org/

Sherman Robinson

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

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