The World Bank’s latest assessment of Ethiopia’s socio-economic situation projects a serious reversal in poverty reduction progress, forecasting that the national poverty rate could rise sharply to approximately 43% by 2025, up from 39% in 2021 (measured at the $3 per day international poverty line). This alarming trend reverses two decades of hard-won progress that saw millions of Ethiopians lifted out of poverty between 2000 and 2015.
The projected rise in poverty is attributed to a combination of severe internal and external factors. These include the destabilizing effects of ongoing internal conflict (such as the Tigray war), recurrent severe droughts and climatic shocks, soaring food and fuel inflation (which severely erodes real income, especially in urban areas), and the immediate, short-term economic strain resulting from the government’s necessary macroeconomic reforms (such as the transition to market-determined exchange rates).
The report emphasizes that this poverty is increasingly concentrated in rural areas, which account for three-quarters of the population and where chronic structural weaknesses—including limited market access and weak human capital indicators—have worsened the crisis. While the government has implemented mitigating measures like raising public sector salaries and subsidizing fertilizer, the challenge of addressing pervasive inequality, high external debt, and fragility will determine the country’s long-term stability prospects.
