Ethiopia’s poverty rate is projected to climb to 43% in 2025, according to newly released projections, reversing significant gains made over the past two decades. This severe deterioration is measured at the $3 per day international poverty line (2021 PPP), rising sharply from 33% in 2016 and 39% in 2021. The setback is attributed to a complex combination of shocks, including internal conflict (such as the war in Tigray), unpredictable rainfall leading to drought, the effects of the COVID-19 pandemic, and a slowdown in economic growth, all severely compounded by soaring food and fuel prices. Economists anticipate the rate will peak in 2025 before starting a gradual decline in 2026.
The crisis has disproportionately impacted the rural population, which accounts for about three-quarters of the country’s 120 million people. Rural poverty stood at 45.2% in 2021 (compared to 15.3% in cities), driven by limited market access and restrictions on land and labor mobility that prevent farmers from capitalizing on higher food prices. The rural-urban divide is starkly reflected in human capital and basic service access: 86% of rural adults had not completed primary school in 2021, and nearly half of rural households reported having at least one stunted child. Furthermore, access to sanitation and electricity for the wealthiest is three to four times higher than for the poorest citizens, with the latest official survey showing multidimensional poverty at 67.1% nationwide.Since mid-2024, the government has launched a series of macroeconomic reforms, including fuel subsidy removal, utility tariff adjustments, and a shift toward a market-based exchange rate, aiming to stimulate private-sector growth. To mitigate the painful short-term effects of these reforms on vulnerable households, authorities have implemented compensatory measures such as raising public-sector wages, increasing safety net payments, and subsidizing fertilizer. The true impact of this reform agenda, however, remains to be definitively measured, with a new National Integrated Household Survey (NIHS) conducted from September 2024 to September 2025 expected to provide an updated picture of the crisis.
