Ethiopia’s Industrial Policy Revealed: Tariffs at 10.5% with 34% “Fiscally Expensive” Measures, World Bank Data Shows

EBR_News Mar 18, 2026

New data from the World Bank’s flagship industrial policy report reveals that Ethiopia employs a distinctive mix of policy tools with 33.2 percent of its interventions classified as “fiscally expensive” and average tariffs of 10.5 percent, positioning it among developing economies that rely heavily on second-choice instruments despite limited fiscal space, according to the newly released “Industrial Policy for Development: Approaches in the 21st Century.”

The report, authored by Ana Margarida Fernandes and Tristan Reed, provides the first comprehensive global database of industrial policy implementation, covering 183 economies. Ethiopia recorded 10 discriminatory policy measures between 2021 and 2023, with none classified as “firm-specific” suggesting the government relies on broad-based instruments rather than targeted interventions requiring intensive administrative capacity.

The data places Ethiopia in stark contrast with regional peers. Kenya, with a similar economy size, implemented 29 measures nearly triple Ethiopia’s count with 20.9 percent fiscally expensive and 3.7 percent firm-specific. Rwanda, despite its smaller economy, recorded 12 measures with comparable tariff levels (16 percent) but significantly higher firm-specific engagement.

The report’s country typology framework suggests Ethiopia’s policy mix reflects binding constraints. With government bandwidth limited, local market size moderate, and fiscal space constrained, the country’s heavy reliance on tariffs averaging 10.5 percent with 10.6 percent dispersion aligns with the pattern of economies using second-choice tools when first-choice subsidies are unaffordable.

Chief Economist Indermit Gill writes in the foreword that “the 25 poorest economies with per capita incomes of less than US$1,200 a year are the heaviest users of tariffs, averaging a 12 percent tariff rate, more than other developing economies and twice the rate of high-income economies.” Ethiopia’s 10.5 percent average places it slightly below this poorest-country average but well above the 5 percent rate in high-income nations.

The report warns that tariff-heavy strategies carry significant costs. “Import tariffs raise costs for producers and consumers alike,” the authors note, citing evidence from India where persistently high tariffs on synthetic fibers hurt apparel export competitiveness relative to Bangladesh and Vietnam. For Ethiopia, where manufacturing exports are a strategic priority, the tariff structure documented in the report may be working at cross-purposes with industrialization goals.

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