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Study on the Human Dimensions of the Financial Crisis in Ethiopia

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Study on the Human Dimensions of the Financial Crisis in Ethiopia STUDY ON THE HUMAN DIMENSIONS OF THE FINANCIAL CRISIS IN ETHIOPIA FINAL REPORT June 2011 Addis Ababa, Ethiopia 1 Acknowledgments In December 2009, the Rapid Impact and Vulnerability Analysis Fund (RIVAF) was launched by the United Nations as part of the Global Pulse Initiative, to support innovative, real-time data collection and analysis to help develop a better understanding of how vulnerable populations cope with impacts of global crises. RIVAF was generously funded by the United Kingdom’s Department for International Development (DfID), and the Government of Sweden with UNFPA co-financing; this study was made possible due to this generous contribution. UNFPA Ethiopia commissioned the Center for Development Consulting (CDC) to undertake the Study. The following professionals of the Center were in charge of the full project implementation and coordination from the preparation of the proposal, the design of the data collection tools, the carrying out of the assessment, to the writing of the reports: Lulit Mitik Beyene (PhD), Team leader and Economist Emezat Hailu Mengesha (PhD), Gender specialist Zelalem Hailegiorgis, Statistician The authors are grateful for the feedback and information provided by different stakeholders including the Ministry of Finance and Economic Development, The Ministry of Education, The Ministry of Women, Children and Youth, The Ministry of Health, The National Bank of Ethiopia, and the Central Statistical Authority. At the regional level, the project has benefited from the invaluable collaboration and input from the Regional Agriculture and Rural Development, Education, Women’s Affairs, Health, Finance, and HAPPCO HIV Offices/Bureaus. The team is most grateful to the UNFPA Ethiopia and Headquarter Offices for their invaluable comments and feedback. The authors would also like to thank the project coordinator on behalf of the UNFPA, Meron Tewfik, for her continuous support. 2 Table of Contents Acknowledgments ...................................................................................................... 2 List of Tables .............................................................................................................. 5 List of Figures ............................................................................................................. 6 Executive summary .................................................................................................... 7 1. Introduction: background and rationale of the study ............................................ 9 2. Objectives .......................................................................................................... 12 3. Methodology ...................................................................................................... 13 4. Impact of the global financial crisis in Ethiopia: a macroeconomic approach ..... 16 4.1. Overview of the Ethiopian Economy: structure and macroeconomic trend ..... 16 4.2. Transmission channels of the crisis: a brief description .................................. 19 4.3. Impact on trade: volumes and prices .............................................................. 19 4.3.1. Exports ........................................................................................................ 19 4.3.2. Imports ........................................................................................................ 22 4.4. Impact on financial flows ................................................................................. 23 4.4.1. Remittances ................................................................................................ 24 4.4.2. ODA ............................................................................................................. 24 4.4.3. FDI ............................................................................................................... 25 4.5. Spill-over effects: a macro perspective ........................................................... 26 4.5.1. Government revenue and expenditure ........................................................ 26 4.5.2. Government accounts: current account and balance of payments .............. 31 4.5.3. Foreign currency reserves ........................................................................... 32 4.5.4. Exchange rate ............................................................................................. 33 4.5.5. Inflation ........................................................................................................ 34 4.6. Impact on economic growth ............................................................................ 37 5. The human dimensions of the global financial crisis in Ethiopia ........................ 39 5.1. Brief overview of major social indicators ......................................................... 39 5.2. Transmission channels from the economic level to human dimensions ......... 40 5.3. Profile of respondents ..................................................................................... 42 5.4. Impact on household income and purchasing power ...................................... 44 5.4.1. Impact on crop farmers ................................................................................ 44 5.4.2. Impact on livestock farmers ......................................................................... 46 5.4.3. Impact on employees of flower farms .......................................................... 48 5.4.4. Impact on construction workers ................................................................... 50 5.4.5. Impact on hotel and restaurant services sector employees ......................... 51 5.4.6. Impact on leather industry employees ......................................................... 53 3 5.5. Impact on health ............................................................................................. 55 5.5.1. Access and affordability of health services and drugs ................................. 56 5.5.2. Impact on people living with HIV/AIDS ........................................................ 57 5.5.3. Effect on SRH .............................................................................................. 59 5.6. Impact on education ....................................................................................... 61 5.6.1. Access and affordability of education .......................................................... 61 5.6.2. Is there a gender differentiated impact ........................................................ 62 5.7. Impact on nutrition and livelihood ................................................................... 62 5.7.1. Effect on dietary habits ................................................................................ 62 5.7.2. Effect on consumption patterns ................................................................... 65 5.8. Impact on women ........................................................................................... 68 5.8.1. Impact on women’s household and market work burden ............................. 68 5.8.2. Effect on women and girls relative to men ................................................... 71 5.9. Impact on the poor and vulnerable groups...................................................... 72 5.10. Regional disparities: urban/rural and vulnerable regions ............................. 75 5.11. Role of environmental factors in agricultural activities ................................. 80 6. Major coping strategies adopted ........................................................................ 82 7. Policy responses ................................................................................................ 84 7.1. Monetary policy ............................................................................................... 84 7.1.1. Fiscal policy ................................................................................................. 85 7.1.2. Exchange rate policy ................................................................................... 85 7.1.3. Social protection programs .......................................................................... 85 8. Conclusion and recommendations ..................................................................... 87 Annexes .................................................................................................................... 91 Annex 1: References ................................................................................................ 91 Annex 2: Questionnaire for survey ........................................................................... 92 Annex 3: Questions for Woreda Officials ................................................................ 102 Annex 4: Tables: Economic and human impacts of the crisis ................................. 104 Annex 5: Methodology ............................................................................................ 133 Annex 6: Administrative Report .............................................................................. 145 4 List of Tables Table 4.1 – Trend in transfers (Million USD) Table 4.2 – Level, growth, and share of external grants (2003 – 2011) Table 4.3 - Capital of approved investment projects by source (Millions Birr) Table 4.4- Balance of Payments (in million USD) Table 4.5 – Trend in annual average inflation Table 5.1 – Changes in volume of production Table 5.2– Changes in income from produce Table 5.3 – Inflation has affected farmers’ livelihood (real income and purchasing
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