Poverty levels in Ethiopia will rise to 43percent by 2025 up from 39 percent in 2021, the World Bank announced on Monday.
In its forecast report on poverty and equity in Ethiopia, the bank anticipates the East African country will see increasing poverty levels in subsequent years mainly due to ongoing conflicts in different parts of the country.
“After making significant strides in reducing poverty for over two decades, Ethiopia has in recent years encountered internal and external challenges that impacted living standards,” the World Bank said, noting that COVID-19 pandemic, the Tigray conflict, severe droughts, a slowdown in GDP growth and soaring inflation were the major contributing factors for deepening poverty situations.
It said inflation hit urban households hardest, while most rural families did not benefit from higher food prices due to limited market engagement.
Additionally, rural communities have restricted access to off-farm opportunities, in part due to policies that limit the effective functioning of land and labor markets. The significant decline in living standards in rural areas, where approximately three-quarters of the population resides, has accentuated the rural nature of poverty in Ethiopia, the bank said.
“Disparities in access to public services by income are stark, with sanitation facilities and electricity connections being nearly three to four times more prevalent in the top 20 percent of the country than in the bottom 20 percent,” the report read.
The bank said the poorest households often experience isolation from markets and public services and are disproportionately affected by climatic shocks and food shortages.
Since mid-2024, the government has implemented a series of macroeconomic reforms, including a transition to market-determined exchange rates, trade and tax reforms, quarterly adjustments to electricity tariffs, and removal of fuel subsidies.
The reforms aim to foster private sector-led job creation, enhance smallholder farmers’ market participation, and strengthen the resilience of poor and vulnerable populations. To mitigate the short-term effects of these reforms on poverty, the government raised safety net benefits, increased public sector salaries, and subsidized fertilizer, according to the World Bank.
Last month, the World Bank and IMF in a joint assessment warned Ethiopia’s economic outlook, declaring that the country’s external debt was “unsustainable” and confirming that the government was already in debt distress.
MG/abj/APA