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Can agriculture be Ethiopia’s growth engine?

Ethiopia is a net exporter of agriculture commodities. However, the low level of industrialized agriculture means that the country exports very little higher value processed food. Despite strong growth in manufacturing, agriculture remains the biggest export earner. Eighty percent of all export revenues of the country and 21 percent of total government revenues stem from the export of agri-products. However, only 1 percent of exported agri-products are in processed form. Agri-exports are dominated by unprocessed commodities while imports primarily comprise processed foods that are growing faster than exports.

The reason for this imbalance is related to urbanization. Over the last 25 years, populations in cities tripled from less than 8 million in 1995 to around 25 million today—leading to growing demand for processed food that domestic producers cannot supply yet. Urban consumers—a rising middle class—buy imported food products at relatively high prices. To satisfy this growing domestic demand and to diversify exports, one would expect a significant supply reaction with increasing investments in the food industry. However, this has not happened at scale yet. 

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