ABSTRACT
Following the change in political leadership in 1991, the economic policy scene in Ethiopia has undergone fundamental changes. During the military rule (the Derg regime) from 1974 to mid-1991, the Ethiopian economy rapidly developed into one of the most inward-oriented and regulated in the developing world. In 1975, “Economic Policy of Socialist Ethiopia” was declared and subsequently the commanding heights of the economy such as banks, insurance companies, medium and large-scale industrial and commercial firms were nationalized. Economic restructuring based on central planning effectively marginalized the private sector virtually to micro-and small-scale activities. The new EPRDF (Ethiopian People’s Revolutionary Democratic Front) regime responded to the dismal economic outcome of the Derg era by embarking on an extensive economic liberalization process in 1992/93 with the support of the international financial institutions, promising a new era of market-driven development. The key elements of the reform program included liberalization of foreign trade and exchange regimes, decontrol of domestic input and output prices, public sector reform to guarantee autonomy of the state owned enterprises (SOEs) and privatize other enterprises, financial market reform and opening the door to foreign investors.
