The government's long-term economic development strategy – Agricultural-Development-Led-Industrialization (ADLI) – is geared to the transformation of the economic structure. The strategy involves an export-led external sector, and internal emphasis on agriculture to supply commodities for exports, domestic food supply and industrial output, and expand markets for domestic manufacturing. The development strategy is supported by an economic reform program developed in cooperation with the World Bank and the International Monetary Fund (IMF) and by a series of structural adjustment programmes. There have been major gains from the reform programme, and from liberalization of the economy, including low inflation, fiscal discipline and low government borrowing, infrastructure improvement and the growth of the private sector after a privatization program was initiated in 1995 under which a majority of former government-owned firms have been denationalized.
The current Growth and Transformation Plan (GTP), finalized in November 2010, was built on the implementation of previous poverty reduction strategies, the Sustainable Development and Poverty Reduction Program for 2002/03−2004/5 and the Plan for Accelerated and Sustained Development to End Poverty for 2005/06−2009/10 (PASDEP) which laid out the directions to achieve the Millennium Development Goals by 2015 and the basis for Ethiopia to reach ‘middle-income' status by 2020−25. In March 2012, the IMF said Ethiopia would achieve this earlier if its rapid growth continued.
PASDEP provided for substantial progress in the provision of social services such as education, health and infrastructure through investing in physical and human capital formation and allocating over 60% of the budget to pro-poor expenditure. The spending on poverty-targeted sectors (both recurrent and capital) steadily increased during this period rising from 42.0% of total expenditure in 2002/03 to over 64% and this has continued. The effects were visible in significantly improved education and healthcare services. Primary school net enrolment rose from 77 percent in 2004/05 to 82 percent in 2009/10, and is now over 96%; completion rates also increased steadily. Secondary enrolment also rose steadily. Tertiary level education increased sharply. The proportion of fully immunized children rose from 20 percent in 2006 to 66 percent in 2010; the percentage of births attended by healthcare workers increased from 16 percent to 29 percent during the same period. In 2005 the maternal mortality was 871 per 100,000 births; this declined to 590/100,000 by 2010. Under-five child deaths fell from 200/2000 to 75/2000 in 2009. Health service coverage increased from 30% to 89% during PASDEP.
In 2004, Ethiopian GDP (Gross Domestic Product) was about 63% of Kenyan GDP and 4.6% of South African GDP; by 2009, the comparison was 97% and 10.1% respectively. Per capita income had increased from $138 to $344 in 2009. In 2009/2010 the economy grew by 10.4%, compared to the estimated growth rate of 6.0% for all Sub-Saharan Africa. Agriculture and allied activities contributed 30% to the increase while the service and industry sectors provided 56% and 13% respectively. Inflationary pressure continued to ease due to prudent monetary and fiscal policies and other government measures, and annual average inflation dropped to 2.8% in June 2010 against 36.4% a year earlier. It has since fluctuated sharply, rising sharply in 2011 and remaining a serious problem in 2012.
The New Constitution
Under the new constitution, thee elections for Ethiopia's first popularly-chosen national parliament and regional legislatures were held in May 1995. Most opposition parties chose to boycott these elections as they did in 2000, in both cases giving the EPRDF a landslide victory. Opposition parties as a whole did finally participate in the 2005 election and the election produced a record number of voters, with 90% of the electorate turning out to cast their vote. The African Union report on the process commended the election for a "display of genuine commitment to democratic ideals ; the US Carter Center concluded that the majority of
the constituency results were credible and reflected competitive conditions; the US Department of State said the elections stood out as a milestone in creating a new, more competitive multi-party political system. The EU Observer Mission, however, uncritically accepting some opposition claims, suggested the election had fallen short of international standards, though it actually classified nearly ninety percent of the polling processes as good or very good. The final results showed opposition parties had increased their seats in Parliament from 12 to an impressive 176, and that they had won all but one of the seats for the Addis Ababa City Council. Despite this, the main opposition coalition refused to accept the results, claiming against all the evidence that it had won. It called for a boycott of parliament, and organized a series of street protests in Addis Ababa at the beginning of November. These rapidly turned violent, and nearly 200 people including 7 policemen died in three days of rioting. A subsequent judicial commission of enquiry deplored the deaths but cleared the police of using unnecessary force. Thousands of people were temporarily detained. A number of opposition political leaders were convicted of various offences and jailed, but pardoned two years later.
Before the next election, in 2010, most of the parties, determined to avoid another outbreak of violence, signed an Election Code of Conduct. The exception was the largest opposition coalition, the Forum for Democratic Dialogue (MEDREK), a coalition of eight parties which included most of the groups that boycotted Parliament in 2005. When it came to the vote, the electorate proved unimpressed by the opposition refusal to take up its seats in 2005, and equally disenchanted by MEDREK's failure to sign the Code of Conduct, by the opposition's lack of alternative policies, its failure to do more than criticize the EPRDF and the public bickering and quarrelling among its leaders prior to 2010. In sharp contrast, after 2005 the EPRDF had revitalized its structures, building up extensive Women's and Youth organizations and reorganizing itself through the country. It won an overwhelming majority in local elections in 2008 and used this as a springboard for the national and federal elections in 2010. By then it also had the added advantage of presiding over significant growth and development, in infrastructure, primary education and health, and of achieving double-digit growth for the whole period between 2005 and 2010. It was hardly surprising that the results were a landslide victory for the EPRDF, including a total reversal of the Addis Ababa results of 2005 - in 2010 it was the opposition which only won a single seat, although over 40% of the city did vote for opposition parties.
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