Outlook for 2011-12

• The ruling Ethiopian People's Revolutionary Democratic Front (EPRDF) is expected to remain firmly in power following an emphatic victory in federal and regional elections in May 2010.
• The opposition was, in effect, removed from parliamentary politics by its landslide election defeat in 2010. Its divided nature and inability to raise significant funds will make it easy for the government to keep it marginalised.
• Ethiopia will continue to support the government of Somalia, and it will retain its position as the key US ally in the volatile Horn of Africa.
• The new five-year Growth and Transformation Plan (GTP), which prioritises agriculture, infrastructure and industry, will shape macroeconomic policy.
• Real GDP growth is forecast to rise to 9% in 2010/11 (year ending July 7th), owing to a favourable agricultural performance, and 9.5% in 2010/11, helped by higher foreign investment and further improvements in the power supply.
• Inflation is forecast to rise to 11% in 2011, owing to higher domestic demand, structural inefficiencies and a significant depreciation of the currency in late 2010. It is expected to stay high in 2012, at 10%, owing to structural constraints.
• The current-account deficit is forecast to average 9.9% of GDP in 2011-12, owing to a structural trade deficit.

Monthly review

• Two of Ethiopia's largest opposition parties, the All Ethiopian Unity Party and the Unity for Democracy and Justice party, have announced plans to merge.
• In mid-December the central bank announced an increase in the minimum savings rate for banks from 4% to 5%. With inflation at 10.2% in November, the negative real interest rate is 5.2%, creating little incentive for people to save.
• Ethiopia's first commercial wind turbine was erected in December by French firm, Vergnet, on its Ashegoda wind farm. Electricity production is expected to reach 30 mw by mid-2011, with the remaining 90 mw to be installed by 2013.
• The government has signed a US$200m loan agreement with the African Development Bank to improve energy infrastructure, including high voltage transmission lines, rural electrification and regional interconnections.
• In December the Ethiopian Revenues and Customs Authority announced that in the first quarter it had collected only around 20% of total budgeted revenue for fiscal year 2010/11. It blamed a concentration on administrative tasks.
• A new windfall tax was introduced by parliament in November on bank profits resulting from the 16.7% devaluation of the birr in September. Banks are required to pay a 75% windfall tax on all such profits.

The ruling Ethiopian People's Revolutionary Democratic Front (EPRDF) is expected to remain firmly in control at all levels of government following its emphatic victory in the parliamentary election in May. The EPRDF has a 99% majority in Ethiopia's House of People's Representatives (lower house), as other candidates won just two seats. The scale of the victory resulted from the memory of the violent crackdown on post-election violence in 2005, along with the passage of restrictive laws governing the media, civil society and political funding. The possibility of widespread election-related civil unrest has passed and the hegemony of the EPRDF will ensure political stability throughout the forecast period.

The prime minister, Meles Zenawi, has agreed to stay on as party leader until 2015, and he will tighten his grip on power. His position has been strengthened by the appointment in September 2010 of loyalists as the chairmen of two of the four parties that comprise the EPRDF coalition. Moreover, the appointment of a new cabinet in October was taken as an opportunity to promote younger supporters to replace older allies who might otherwise have tried to position themselves to succeed Mr Meles. It is unclear whether he is strengthening his position with the intention of running for re-election in 2015 (he is only 55 years old) or to enable him to choose his own successor. What is clear is that Mr Meles is currently the only candidate capable of holding together the EPRDF's multi-ethnic framework, using his authority and force of personality.

After the conclusion of the May 2010 election, the EPRDF will consolidate its control, while the opposition will enter a period of reflection, trying to come up with strategies to force the government to open up the political space over the next five years. The next elections are not due until 2015, but the opposition has a lot of work to do to make itself competitive at the polls. The largest opposition alliance, the Ethiopia Federal Democratic Unity Forum (known as Forum, or Medrek in Amharic), has announced plans to transform from a coalition into a political front and has appointed a new chairman. One of its six constituent parties, the Unity for Democracy and Justice, has announced plans to merge with a smaller opposition party, the All Ethiopian Unity Party, which would enlarge the alliance. However, most of the opposition parties are still having difficulty agreeing on anything. The divided nature of the opposition, as well as its inability to raise significant funds domestically, will make it relatively easy for the government to keep it marginalised, particularly in the absence of substantial international pressure.

The instability in the volatile Horn of Africa will cement Ethiopia's position as the key ally of the US in the region, and relations with Eritrea and Somalia will continue to dominate the foreign-policy agenda. The protracted border dispute with Eritrea remains at an impasse and attempts at a diplomatic solution have failed. The risk of conflict remains, although continued deadlock is the most likely scenario. Somalia will remain a source of tension, and this danger has escalated following bomb attacks carried out by a radical Islamist group, al-Shabab, in Uganda in mid-2010. Ethiopia will continue to offer support to the government of Sheikh Sharif Sheikh Ahmed and has some troops in Somalia, but it is likely to stop short of a large, official military intervention, given the economic, military and diplomatic costs that this would entail.

The Ethiopian government will closely monitor the situation in Sudan as the south of the country will almost certainly vote to secede in a referendum in January. Sudan has become a key trading partner, and Ethiopia relies on it for almost all of its oil needs. The border between the north and south has still not been defined and if renewed violence broke out over negotiations it could disrupt Ethiopian oil supplies, forcing the country to resort to more expensive imports from the Middle East. As a result, the government will take a measured diplomatic approach to developments in Sudan as it seeks to remain neutral and to protect its economic interests.

The main challenge facing Ethiopian policymakers will be to harness the recovery in global demand and sustain the rise in domestic demand while avoiding the return of high inflation and other macroeconomic imbalances. Despite concerns about governance and the lack of a functioning opposition, the country's strategic importance means that donors will continue to provide support to help to keep the fiscal and external deficits in check. The Ethiopian government will generally adhere to an IMF-style policy framework-although it will continue to bar foreign banks-in order to uphold donor funding. It performed well under the 14-month, US$235m exogenous shocks facility with the IMF that concluded in November 2010, but a successor IMF programme in 2011-12 is unlikely as the authorities are keen to maintain economic independence.

The government introduced a new five-year economic plan, the Growth and Transformation Plan (GTP), at the end of 2010, which prioritises agriculture, infrastructure and industry (mining, manufacturing and textiles). The government will find it difficult to achieve the GTP's ambitious goals while realising its other aim of reducing dependence on aid and foreign investment. Donors will remain committed to projects in areas such as road transport, energy and information and communications technology, as well as to building capacity in the public sector and developing the private sector.

The government will maintain a relatively tight fiscal stance because of the risk of macroeconomic imbalances after several years of rapid growth, although there may be a small degree of loosening in response to global fragility. Spending will rise quickly, as an impatient government will continue to espouse a state-led development model that places the emphasis on public investment rather than private-sector growth. Domestic revenue performance will improve at a decent rate, although it is coming from a low base relative to GDP, even by African standards. The revenue agency, the Ethiopian Revenues and Customs Authority, will continue to implement measures to broaden the tax base, improve compliance and reduce evasion. A windfall tax on bank profits arising from the 16.7% devaluation of the currency in September 2010 will bolster government coffers in 2010/11 (fiscal year ending July 7th). External grants will remain a vital component of public financing and will rise following the peaceful elections in 2010. Overall, the Economist Intelligence Unit expects the budget deficit as a percentage of GDP to edge slightly higher, to 2.8% in 2010/11 and to 3% in 2011/12, as a proposed public-sector pay rise will ensure that the government balance cannot match its performance in 2009/10, when the deficit was estimated at only 1.7%.

In a significant change to monetary policy at the end of 2010, the National Bank of Ethiopia (NBE, the central bank) said that it will stop financing public spending and that it will adopt a low reserve money growth target. This is aimed at tackling the problems of excess liquidity and demonetisation. Maintaining the reduction in inflationary pressures will remain the NBE's priority, and it will aim to do this by limiting money supply growth and reducing core, non-food inflation. Its task will be made difficult by several factors, including a lack of sophistication in financial markets, which weakens the link between interest rates and prices, and the large impact on inflation of exogenous factors such as the weather. The NBE has agreed to remove the limits on bank lending once low inflation looks as though it has been entrenched, but with inflationary pressures expected to rise, this policy change looks unlikely in 2011. The NBE will introduce measures to improve liquidity management, including an overhaul of Treasury-bill auctions. Foreign-exchange reserves are expected to remain at around the current level of just over two months of import cover, as the government prefers to spend resources on development rather than build up reserves beyond this level.

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Economic growth will accelerate as the economy recovers from a slowdown caused by the fragile global economic environment. Growth in agriculture will continue to underpin the economic expansion as-barring drought-agriculture and agro-industry benefit from the movement of subsistence farmers into the commercial economy, helped by the expansion of road, power and market networks. Moreover, an increase in the area planted and greater fertiliser use should ensure higher yields. Industry will be helped by an improvement in power supply; the addition of three hydroelectric power stations in 2010 more than doubled capacity to around 2,000 mw. Rationing has continued, as all three have been producing below capacity owing to teething troubles, but output will improve over 2011-12, boosting economic activity. Barriers to business caused by the government's state-led development model will hinder private-sector growth, but the stable political outlook following elections in 2010 will make the investment climate more attractive. Based on these factors, we forecast real GDP growth of 9% in 2010/11. This will increase slightly to 9.5% in 2011/12 as foreign investment rises and the electricity supply stabilises.

The inflation rate will increase in 2011 after falling to an estimated average of 7.7% in 2010-its lowest rate since 2004; this was almost entirely the result of deflation in food prices. Further improvements in agricultural output will limit food price inflation in 2011, but non-food inflation will accelerate. This will be led by international price rises for capital goods such as construction materials; continued inefficiencies in supply chains from ports in Djibouti, Kenya and Sudan; and the 16.7% devaluation of the exchange rate in September 2010. We forecast that inflation will average 11% in 2011 and that structural constraints will keep it high, at around 10%, in 2012.

The birr will continue to be managed closely by the central bank, which maintains a policy of gradual depreciation interspersed with sharper adjustments. The IMF classifies this as a crawl-like arrangement and supported a 16.7% devaluation in September 2010, which brought the birr in line with fundamentals. However, we expect that the government will continue to wield the exchange rate as a policy tool in 2011-12, devaluing the currency to improve export competitiveness. Foreign-exchange reserves have recovered since reaching dangerously low levels during the global financial crisis and will offer some support to the birr, but reserves will remain short of the recommended minimum of three months' import cover. The pattern of gradual depreciation and intermittent larger adjustments is likely to continue. We forecast that the currency will weaken from an average of Birr14.40:US$1 in 2010 to Birr17.90:US$1 in 2011 and Birr19.60:US$1 in 2012.

Ethiopia's structural trade imbalance will keep the overall current account firmly in deficit during 2011-12. Trade activity will quicken in line with faster economic growth, although import growth will outpace export growth, leading to a wider trade deficit in both years. Robust economic growth, high global oil prices and growing demand for capital goods for infrastructure projects will drive up import costs. Exports will receive a boost from a more competitive exchange rate, which should enhance export volumes, as well as an expected rise in cash crop production, although weaker world coffee prices will partially offset this. The services account is forecast to switch from deficit to surplus owing to the projected start-up of electricity exports to neighbouring countries in 2011. The country's dependence on concessional borrowing from donors and private remittances will continue (current transfers are over twice as large as export earnings) and growth in transfers will mitigate the expanding trade deficit. New data just released for 2008-09 show GDP growth lower than previously estimated. This in turn has raised the forecast current-account deficit as a percentage of GDP, but the trend remains the same. Overall, the current-account deficit is forecast to average 9.9% (previously 4%) of GDP in 2011-12.

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Two of Ethiopia's largest opposition parties, the All Ethiopian Unity Party (AEUP) and the Unity for Democracy and Justice (UDJ) party, announced their intention to merge in late December. This merging has long been a possibility, as both were members of the now defunct opposition alliance, Coalition for Unity and Democracy (CUD), which fared well in the 2005 general election. However, the strained relationship between leaders of the two parties-AEUP leader, Hailu Shawel, and former UDJ leader, Birtukan Medeksa-had previously put the prospect of such a union in doubt. In the past, both leaders had said that the chance of the two parties officially merging was slim.

Despite a successful showing in the May 2005 elections, the CUD alliance fell apart soon after in the face of a violent government crackdown. The coalition won 89 parliamentary seats in the election, as well as over 200 seats in regional assemblies and city governments. However, following allegations of fraud and public demonstrations in which an estimated 200 people were killed by government security forces, the majority of the party's leadership was imprisoned. After spending 18 months in prison following convictions for attempting to overthrow the government, the CUD leaders, including Ms Birtukan and Mr Hailu, were finally pardoned and released in 2007.

However, by this time the membership of the CUD had fractured. While the AEUP was a member party of the CUD, the UDJ was only created by Ms Birtukan upon her release from prison in 2007. It borrowed a large part of its membership and political manifesto from the CUD. However, Ms Birtukan was rearrested in late 2008 and only released in October 2010; it appears unlikely that she will return to politics in the near future. Meanwhile, Mr Hailu was re-elected as leader of the AEUP in late December 2010, despite having offered his resignation following the party's poor performance in the May 2010 elections. The absence of Ms Birtukan from the political scene may have aided the planned merger, but if she were to come back as an active leader of the UDJ, the union of the two parties could be put in doubt.

It has been suggested that the reason for the proposed merger of the AEUP and the UDJ is a recognition among opposition leaders that they are too weak and divided to pose a significant challenge to the ruling Ethiopian People's Revolutionary Democratic Front (EPRDF). Yet eight opposition parties, including the UDJ, but not the AEUP, formed an opposition coalition, the Ethiopia Federal Democratic Unity Forum (known as Forum or Medrek in Amharic) to contest the 2010 elections. Despite this united front, the opposition secured only one seat in the 547-seat national parliament; the balance being one independent and 545 EPRDF seats.

There is a second, more likely, motivation for the merger, relating to an announcement in 2010 that Medrek planned to transform from a coalition to a front. Under the laws governing political party registrations, a coalition is defined as two or more political parties that merge for a limited period with a specified objective (typically an election). A front, on the other hand, is defined as two or more parties with a common name, political programme and rules. As a front, political groups are more closely associated with a common political platform, exist legally and the grouping does not expire after a specified period of time. The UDJ has been a leading proponent for the change and merging with the AEUP would put it in a stronger position within a Medrek front. Mr Hailu would also benefit by securing a top position within the UDJ, rather than joining Medrek directly as a leader of a smaller party. Regardless of the reasons, an AEUP-UDJ merger would put the opposition closer to its form in the 2005 elections under the CUD, when it had substantial successes.

Ethiopia has slipped down the rankings in the Economist Intelligence Unit's democracy index as its score deteriorated following a landslide win for the ruling party in legislative elections in 2010. It fell from 105 to 118 in the rankings out of 167 countries surveyed, and the deterioration also meant a decline from being classified as a "hybrid regime" to "authoritarian". Democracy the world over has been in retreat over the past two years as the economic recession led to backsliding on previous progress. Yet Ethiopia has fared worse than most and shares its new classification as an authoritarian state with countries such as Cuba, Zimbabwe and North Korea. It is a long way behind the top African performers: Mauritius, Namibia, South Africa and Botswana.

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Ethiopia has become a de facto one party state

A large part of the Ethiopia's poor showing is its score of zero in the electoral process category. The roots of this can be found in the strong crackdown by the state on post-election violence in 2005, along with an erosion of political liberties and freedoms since then, which put the country on a path towards becoming a de facto one-party state. As protestors took to the streets in 2005, opposition leaders were arrested, divided and sidelined, and 193 people died. Adding to this overt attack on opposition leaders, the government also began quietly to close the political space, in increments through the passage of restrictive laws governing media, civil society and political funding. So although there were some complaints of intimidation and violence around the 2010 polls, legislating a narrowing of political space over five years greatly reduced the need for such blunt repressive measures, allowing the ruling party to garner 545 out of 547 seats in parliament.

It is not all bad news for democracy in the country. Ethiopia scores relatively well in the categories of political culture-reflecting the strong support from the population for the role of democracy-and political participation, highlighting the number of opposition parties operating in the country. Ethiopia scores below most of its neighbours for civil liberties, indicating the recent tightening of controls over the media. The score for functioning of government is low, in part representing the lack of institutional capacity in many ministries and slow bureaucratic processes.

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Democracy index 2010: Democracy in retreat, a free white paper containing the full index and detailed methodology, can be downloaded from www.eiu.com/DemocracyIndex2010.

Note on methodology

There is no consensus on how to measure democracy and definitions of democracy are contested. Having free and fair competitive elections, and satisfying related aspects of political freedom, are the sine qua non of all definitions. However, our index is based on the view that measures of democracy that reflect the state of political freedom and civil liberties are not "thick" enough: they do not encompass sufficiently some crucial features that determine the quality and substance of democracy. Thus, our index also includes measures of political participation, political culture and functioning of government, which are, at best, marginalised by other measures.

Our index of democracy covers 167 countries and territories. The index, on a 0 to 10 scale, is based on the ratings for 60 indicators grouped in five categories: electoral process and pluralism; civil liberties; the functioning of government; political participation; and political culture. The five categories are inter-related and form a coherent conceptual whole. Each category has a rating on a 0 to 10 scale, and the overall index of democracy is the simple average of the five category indices.

The category indices are based on the sum of the indicator scores in the category, converted to a 0 to 10 scale. Adjustments to the category scores are made if countries fall short in the following critical areas for democracy:

• whether national elections are free and fair;
• the security of voters;
• the influence of foreign powers on government; and
• the capability of the civil service to implement policies.

The index values are used to place countries within one of four types of regime:

• full democracies-scores of 8 to 10;
• flawed democracies-score of 6 to 7.9;
• hybrid regimes-scores of 4 to 5.9;
• authoritarian regimes-scores below 4.

In mid-December the National Bank of Ethiopia (NBE, the central bank) announced that the minimum savings rate for banks would be increased from 4% to 5% to encourage higher public saving. One of the government's greatest economi.c challenges is raising national savings as real interest rates have been negative for several years. The minimum savings rate was last increased from 3.5% to 4% in 2008, but inflation averaged over 40% that year, severely eroding the value of savings. Although the NBE's decision to increase the minimum rate sends an important signal, it will have little practical impact. In November year-on-year inflation was 10.2%, down slightly from the 10.7% recorded in October. However, it means that the negative real interest rate continues to hover around 5%, creating little incentive for people to save.

Despite these obstacles, the government will continue to try to boost national savings in order to support its new five-year Growth and Transformation Plan (GTP). It has recently issued new higher rate bonds through the Development Bank of Ethiopia (November 2010, Economic policy), as well as small denomination bonds from the NBE to encourage low-income communities to engage in formal savings schemes. The government hopes to increase the financing available to small and medium-sized businesses from commercial banks by increasing deposits. However, all of these efforts will founder unless the real interest rate becomes positive. The government will thus continue to try to build on recent success in lowering inflation in order to achieve its development goals.

Ethiopia's first commercial wind turbine was erected in December by French firm, Vergnet, on its 120 mw Ashegoda wind farm. Plans to develop the wind farm were announced over three years ago when the government signed a US$303m deal with Vergnet. The deal was largely financed through a loan guaranteed by French export credit agency, Coface, along with financing from the Agence française de développement (November 2008, Economic performance). Electricity production from the farm is expected to reach 30 mw by mid-2011, with the remaining 90 mw to be installed by 2013. As Ethiopia hurries to improve its electricity infrastructure to deliver hydroelectric power to the whole country as well as exporting it to neighbouring East African countries, the Ethiopian Electric Power Corporation (EEPCo) is trying to diversify production sources. In December the government also approved a Chinese loan worth US$94m to finance another wind power project. Production capacity at the wind farms will be small compared with Ethiopia's hydroelectric plants, but if successfully implemented wind power could be an attractive proposition for green investors as the demand for energy in Sub-Saharan Africa's second most populous country grows quickly.

Following the completion of several large power plants in 2010, attention has switched to improving the transmission of electricity. The government has signed a US$200m loan agreement with the African Development Bank (AfDB) to improve energy infrastructure, including high-voltage transmission lines, rural electrification and regional interconnections. Three major hydroelectric projects were completed in 2010, boosting the country's electricity production capacity to 2,000 mw, but poor infrastructure means that power cuts and shortages are still common. Plans to start exporting electricity to Djibouti and Sudan have also been delayed, following technical failures at the Gilgel Gibe II plant at the start of 2010 (February 2010, Economic performance). Repair work was completed at the end of 2010, but the plant is still only producing at around 25% of capacity. Meanwhile, Ethiopia's largest hydroelectricity plant, the 460 mw Tana Beles power plant, has yet to become fully operational despite being inaugurated in May 2010, and poor transmission infrastructure is likely to limit its impact when it does. Overall, the government is targeting electricity production of 8,000 mw by 2015, enough to keep pace with projected annual growth in domestic electricity demand of 32% as well as the start of large-scale electricity exports. There is little doubt that the country has enormous hydroelectric potential (45,000 mw according to the World Bank), but the development of transmission infrastructure will need to keep pace with the building of new dams if the government is to meet its ambitious goals.

In December the Ethiopian Revenues and Customs Authority (ERCA) announced that it had collected birr11bn (US$764m) in tax and nontax revenue in the first quarter of the 2010/11 fiscal year (year ending July 7th). This amounts to around 20% of total budgeted revenue for 2010/11 and is birr1bn behind target for the first quarter. Despite the shortfall, the ERCA said that it has made progress in tracking down birr382m (US$26.5m) in unpaid debts and back taxes. The ERCA has also been aggressively pursuing tax dodgers through the courts, filing over 500 criminal and civil cases. To date it is estimated to have won over 180 of these, resulting in payments and often jail time for offenders.

Overall the ERCA aims to boost domestic revenue from 8.5% of GDP in 2009/10 to 11% of GDP in 2010/11-an ambitious target. It blamed a concentration on administrative tasks during the first quarter for the shortfall, and says that remaining revenue collection targets for 2010/11 will be met. Its chances are good, particularly as revenue will benefit from a new windfall tax introduced by parliament in November on bank profits resulting from the large devaluation of the birr in September (September 2010, Economic performance). Under the legislation, banks are required to pay a 75% windfall tax on all such profits calculated based on banks' net foreign-exchange gains on August 31st which, it is estimated, will add around birr1.5bn (US$83m) to government coffers this year. By end-2010 six banks had already made windfall tax payments of birr794m. Unsurprisingly, the state-owned Commercial Bank of Ethiopia (CBE) paid the largest amount (birr286m), while Awash International and Wegagen Bank are the largest private-sector players. Despite this windfall, the Economist Intelligence Unit expects the budget deficit as a percentage of GDP to edge slightly higher, from 1.7% in 2009/10 to 2.8%, in 2010/11 owing to a proposed public-sector pay rise.

Although much attention is focussed on Chinese investment in Ethiopia, the Ethiopian Investment Authority (EIA) has placed China number three in terms of foreign investment coming into the country, behind both Saudi Arabia and India. Saudi investors have been pouring large amounts of money into Africa, securing vast tracts of land for the production of food products to be brought back to their home country. The bulk of India's investment are in agribusiness (sugar), but a US$640m credit line to Ethiopia by India's EXIM Bank (November 2008, Economic performance) has encouraged Indian investors to enter projects in power, electricity, water and railways.

Although China comes third in terms of value of investment, it has a total of 1,065 projects in Ethiopia, placing it well ahead of fourth-placed Sudan in terms of volume, with 701 projects. Chinese investment has been across a wide range of sectors including manufacturing, infrastructure, power, roads, textiles, construction and automotive. Turkish investment is estimated to have risen over fourfold in the last four years, mainly in the textiles sector. The EIA estimates that 1.73m jobs have been created by foreign investors in the past five years, while foreign direct investment (FDI) has been growing at around 25% per year. Ethiopia's growing attractiveness owes much to generous tax breaks and land lease agreements. The country's large population and low labour costs are also a major draw for labour-intensive industries and it offers sub Saharan Africa's second-largest domestic consumer market after Nigeria. However, its landlocked nature and poor infrastructure continue to be a drag on investment.

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Please see graphic below

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Please see graphic below

Land area

1,221,900 sq km

Population

75m (mid-year estimate for 2010)

Main regions

Population in '000 (1999 official estimates)

Oromiya: 21,694 Afar: 1,188

Amhara: 15,850 Benishangul-Gumaz: 523

SNNPR: 12,132 Dire Dawa: 306

Somali: 3,602 Gambella Peoples: 206

Tigray: 3,593 Harari Peoples: 154

Addis Ababa (capital): 2,424

(Addis Ababa and Dire Dawa are municipalities)

Climate

Temperate on plateau, hot in lowlands

Weather in Addis Ababa (altitude 2,450 metres)

Hottest months, April-May, 10-30°C; coldest month, December, 5-23°C; driest month, December, 5 mm average rainfall; wettest month, August, 300 mm average rainfall

Languages

Amharic, Orominya, Tigrinya, Afar, Somali and others; English and Amharic are mainly used in business

Measures

Metric system; also 1 gasha = 40 ha, 1 kend = 0.5 metres, 1 frasoulla = 17 kg

Currency

The birr (previously the Ethiopian dollar) = 100 cents; the single legal exchange rate is determined by a weekly auction

Time

3 hours ahead of GMT

Public holidays

January 7th (Christmas), January 19th (Epiphany), March 2nd (Battle of Adowa), May 28th (Downfall of the Derg), September 11th (New Year), Good Friday, Easter, Eid el Fitr, Eid el Ahda, Maulid; the Ethiopian calendar has 13 months

Official name

Federal Democratic Republic of Ethiopia

Form of state

Federal republic

Legal system

The federal constitution was promulgated by the transitional authorities in December 1994; in May 1995 representatives were elected to the institutions of the new republic, which came formally into being in August 1995

National legislature

The Federal Assembly consists of the House of People's Representatives (lower house; 547 members) and the Council of the Federation (upper house; 108 members); the nine regional state councils have limited powers, including that of appointing members of the Council of the Federation

National elections

May 2010 (federal and regional); next elections due in May 2015

Head of state

President-a largely ceremonial role, appointed by the Council of Peoples' Representatives; currently Girma Wolde-Giorgis (appointed October 2001)

National government

The prime minister and his cabinet (Council of Ministers)

Main political parties

The Ethiopian People's Revolutionary Democratic Front (EPRDF) won all but two of the seats in parliament in the election in May, 2010; it evolved from the coalition of armed groups that seized power in May 1991; the Tigray People's Liberation Front, the Amhara National Democratic Movement, the Southern Ethiopia People's Democratic Movement and the Oromo People's Democratic Organisation; Opposition parties include Unity for Democracy and Justice (UDJ), the United Ethiopian Democratic Party-Medhin (UEDP-Medhin), the United Ethiopian Democratic Forces (UEDF) and the Oromo Federalist Democratic Movement (OFDM)

Prime minister: Meles Zenawi

Deputy prime minister & foreign affairs: Hailemariam Desalegn

Key ministers

Agriculture & rural development: Tefera Deribew

Customs: Melaku Fenta

Key ministers

Education: Demeke Mekonnen

Federal affairs: Shiferaw Teklemariam

Finance & economic development: Sufian Ahmed

Health: Tewodros Adhanom

Justice: Berhanu Hailu

Labour & social affairs: Abdulfata Abdulrahman

Mines: Sinkenesh Ejgu

Science & technology: Desse Balke

Trade: Abdurahman Sheikh Mohamed

Transport & communications: Diriba Kuma

Urban development & construction: Mekuria Haile

Water & energy: Alemayehu Tegenu

Central bank governor

Teklewold Atnafu