Infrastructure and Economic Transformation in Ethiopia

Abstract

Investment in infrastructure has a central role in the development agenda and is critical for supporting economic growth and poverty reduction. Infrastructure affects growth through two channels: directly through physical capital accumulation and indirectly through improvement in productivity. Investment in infrastructure enhances private sector activities by lowering the cost of production and opening new markets. Infrastructure investment in power generation, water, sanitation, and housing improves the social well-being of citizens. This chapter examines the pace and scale of infrastructure development in Ethiopia in the post-1991 period. The unparalleled expansion of infrastructure since the EPRDF came to power in 1991 has had a significant influence on the trajectory of Ethiopia’s economic growth. Investment in infrastructure now accounts for more than 15 per cent of GDP annually. Heavy investments in power, roads, rail network, irrigation, aviation, and logistics have helped to unleash the country’s potential both economically and as a major manufacturing hub in Africa.