A recent report by the United Nations Conference on Trade and Development (UNCTAD) highlights Ethiopia’s urgent need to diversify its economy and reduce reliance on crude goods exports to ensure sustainable growth and stability. The comprehensive study, incorporating data up to fiscal year 2023, underscores challenges linked to Ethiopia’s heavy dependence on raw material exports and calls for accelerated value-adding activities.

According to UNCTAD’s statistics, Ethiopia’s commodity exports totaled approximately USD 3.85 billion during 2021-2023. However, of this, about USD 3.38 billion represented exports of goods that were not allocated to any specific category, signaling a significant concentration in unprocessed raw materials. The report flags a worrisome indicator that exports of all classified products relative to GDP reached just 7.2% in the same period, while income derived from natural resource rents ballooned to 85.4% of GDP in 2020-2021. This points to Ethiopia’s economic dependence on extractive sectors with little downstream processing.

In the composition of exports, agricultural products dominated, accounting for 70.7% of Ethiopia’s exports in 2021-2023. Minerals comprised 10.9%, and energy exports contributed a modest 1.3%. Coffee and coffee substitutes remained the nation’s leading individual export item, representing 30.6% of total exports, followed by oilseeds and oily fruits at 13.7%, and grains at 10.2%.

UNCTAD’s report reiterates the long-standing global concern that continued reliance on raw material exports exposes economies to global commodity price volatility and stifles sustainable industrial development. This challenge is particularly acute for structurally vulnerable countries, including over 80% of low-income and landlocked developing countries, as well as around 60% of small island developing states, of which Ethiopia is an example.

Between 2021 and 2023, UNCTAD notes that two-thirds of the 143 developing countries assessed (95 countries) remained dependent on raw material exports, reflecting slow progress on diversification across much of the developing world.

On the import side, Ethiopia brought in crude goods worth USD 5.19 billion during fiscal years 2021-2023, with food products making up the largest share at USD 3.02 billion. This import pattern highlights Ethiopia’s paradoxical position of exporting agricultural commodities while remaining dependent on food imports.

Human development indicators underline the urgency of economic diversification. Ethiopia’s Human Development Index (HDI) was 0.492 in 2019, while the share of its population living below the global poverty line stood at 22.2% in 2022. Against this backdrop, UNCTAD emphasizes that strategic investments are vital to strengthen the value addition process, expand industrial diversification, and implement sound trade policies that can underpin Ethiopia’s economic resilience and sustainable development.

The report serves as a reminder that breaking out of commodity dependence requires active policy measures fostering industrialization, technology adoption, and diversification beyond the traditional agricultural and mineral sectors. For Ethiopia, such steps would reduce vulnerability to external shocks, generate more stable income streams, and create broader employment opportunities.

UNCTAD’s findings warn that Ethiopia’s current economic structure remains highly vulnerable due to overreliance on crude goods exports. To build a more prosperous and stable future, Ethiopia must accelerate efforts to promote value addition and diversify its export base, maximizing the benefits of its agricultural strengths while developing new industrial capacities.

A new comprehensive study highlights the urgent need for a Credit Guarantee Fund to enhance access to finance for small and medium-sized enterprises (SMEs) in Ethiopia. According to the report titled “Small and Medium Producing Enterprises in Ethiopia: Challenges, Opportunities and Solutions,” such a fund is essential to increase trust among banks and improve lending confidence, thereby unlocking vital funding for SMEs.

The study, led by Netsanet Jote (PhD), Head of Research Development and Management Center at the Policy Studies Institute (PSI), underscores the critical role SMEs play as the backbone of the economy and the labor market. “Productive SMEs are key drivers of national economic growth,” Netsanet emphasized, citing data from the World Bank that estimates SMEs represent roughly 90% of all businesses worldwide and provide over 50% of global employment.

Further, Netsanet noted that formal SMEs contribute up to 40% of gross domestic product (GDP) in developing countries, with the overall impact rising significantly when informal enterprises are included. In Ethiopia, SMEs are instrumental in promoting industrial development, job creation, and inclusive economic transformation.

Despite their importance, Ethiopian SMEs face persistent systemic challenges that constrain their growth and full potential. Limited access to finance and markets, inadequate infrastructure, technological and technical capacity gaps, and bureaucratic and regulatory hurdles combine to hamper their performance, the report found.

Highlighting the finance gap, the study reveals that only 69.5% of surveyed SMEs accessed private bank loans, while 79.7% used savings and loan unions, and 86.4% received financing from the Development Bank of Ethiopia (DBE). However, the availability of loans remains limited by low loan ceilings, lengthy approval processes, short repayment terms, high interest rates, and stringent collateral requirements. Many SMEs also suffer from a lack of credit information and financial literacy, aggravating their challenges in navigating financial systems.

Netsanet pointed out that these constraints result in many SMEs suffering from insufficient working capital and poor credit access, undermining their ability to invest in expansion and innovation.

As a solution, the report calls for the establishment of a dedicated loan guarantee fund designed to build greater confidence among lenders and encourage banks to increase credit provision to SMEs. Netsanet stressed the fund’s potential to reduce lending risks, making financing more affordable and accessible for these enterprises, especially in growth sectors like technology and human capital development.

In conjunction with the loan guarantee fund, the report recommends mandatory credit rationing policies to counteract the traditional bias favoring large corporations, ensuring SMEs receive a fair share of available financial services. Increased leasing finance is also encouraged as a flexible mechanism for SMEs to acquire essential productive assets without heavy upfront costs.

The study concludes that while Ethiopian SMEs acknowledge their pivotal role in innovation, economic expansion, and employment, ongoing funding shortages, infrastructure deficits, and insufficient policy support limit their impact. It advocates for comprehensive strategies that combine enhanced funding access, integrated support services, and improvements in infrastructure to unlock SMEs’ full potential.

By implementing these targeted interventions, Ethiopia stands poised to harness its SME sector as a powerful engine of inclusive and sustainable economic development, bolstering its global competitiveness.

Despite facing significant macroeconomic and operational hurdles, Ethio Telecom has reported robust financial performance in the last fiscal year, demonstrating resilience amid adversity.

The state-owned telecom giant recorded Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of 76 billion birr, achieving 104% of its annual target. This figure marks an impressive 84% increase compared to the 34.8 billion birr registered at the conclusion of its previous BRIDGE strategy.

Ethio Telecom’s success comes despite numerous challenges, including the weakening of purchasing power due to macroeconomic fluctuations, foreign exchange shortages, infrastructure damages, security problems, cable theft, and operational interruptions. The company also confronted limitations arising from the constrained capacity of domestic contractors, recurrent power outages, and fuel scarcity.

Speaking about the company’s growth, Ethio Telecom CEO Frehiwot Tamiru highlighted the pivotal role played by the company’s digital finance platform, Telebirr. The service registered 7.29 million new users in the fiscal year, pushing the total subscriber count to 54.84 million—achieving 99.7% of its target and representing a 15.3% growth compared to the previous year.

However, Telebirr’s expansion was not without challenges. The platform encountered fraudulent activities related to digital transactions, limitations on bank fund availability, and delays in implementing standardized national procedures for customer verification.

Ethio Telecom said it has collaborated closely with federal and regional authorities to tackle these issues, including increasing reliance on local providers for telecom inputs. Ongoing dialogue with legislators has yielded positive results, accompanied by broad customer awareness campaigns aimed at strengthening protections against fraud.

The company reported paying 43.8 billion birr in taxes to the government during the fiscal year. Additionally, $23.5 million (approximately 2.41 billion birr) was allocated for loan repayments, and 12.6 billion birr was distributed as dividends to the government.

Telebirr’s contribution goes beyond facilitating digital money transfers; it fills a critical gap in financial inclusion by offering accessible mobile money services. Its extensive network of self-help channels, agents, and service centers across Ethiopia enables citizens to conduct transactions securely and conveniently, even in areas underserved by traditional banking infrastructure.

According to the company’s reference to the GSMA Global Mobile Money Report (April 2025), money transfers constitute 28% of the global mobile money transaction value. Telebirr has outperformed this global benchmark, with money transfer transactions representing 35.8% of its total transaction volume in 2024/25.

Ethio Telecom’s solid financial performance coupled with Telebirr’s sustained growth reaffirms the company’s vital role in Ethiopia’s digital transformation agenda. These achievements align with its ambitious three-year lead growth strategy focused on expanding digital services and financial inclusion nationwide.