The Dilemma of conflict and Economic Growth in Ethiopia

Although I have some reservations if indeed the official growth rates of Ethiopia are realistic, the ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF) and of course the government has made an important stride and appreciable task in building major infrastructure in power, road, and rail sectors and attracting foreign investment. That has helped the country achieve better economic growth than during the time of the two preceding governments, the Dergue and the Imperial regimes. It has also positively changed the image of the country using economic and pan-African diplomacy until the political violence and crisis erupted in 2016 followed by the declaration of a six-month State of Emergency, which is extended by another four months now.

Africa’s drive for fast growth has garnered a great deal of attention over the last decade. This means taking lessons from the economic policy-making process of fast-growing East Asian countries like Taiwan and South Korea is important. Both nations confronted similar problems in their drive for fast growth and poverty reduction, without which the registered success in those countries would have been unthinkable.

The story of the Laffer curve and three points about Ethiopia’s tax revenue

In economics, the Laffer curve is one possible representation of the relationship between rates of taxation and the resulting levels of government revenue. It postulates that no tax revenue will be raised at the extreme tax rates of 0Pct and 100Pct and that there must be at least one rate that maximises government taxation revenue. The curve is typically represented as a graph (see the figure on the following page), which starts at 0Pct tax with zero revenue, rises to a maximum rate of revenue at an intermediate rate of taxation, and then falls again to zero revenue at a 100Pct tax rate.