Economy of Eritrea

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Eritrea secured independence from Ethiopia on May 24, 1993. Eritrea faced major economic problems and is in the process of rebuilding its economy. The United Nations has ranked Eritrea as 164 out of 174 nations in 2005 on its Human Development Index, an indicator of economic and physical conditions in a country. Eritrea has experienced modest economic growth in recent years, indicated by an improvement in Gross domestic product (GDP) in 2004 of 2.5% over 2003. However, worker remittances from abroad currently contribute 40%-50% of GDP.

Economy of Eritrea
Currency	1 nakfa = 100 cent
Fiscal year	Calendar year
Statistics [1]
GDP ranking	177th by per capita (at PPP) (2004)
GDP	$4.154bn (2004 est.)
GDP growth	2.4% (2004 est.)
GDP per capita	$900 (2004 est.)
GDP by sector	agriculture (12.4%), industry (25.9%), services (61.7%) (2004 est.)
Inflation	10% (2004 est.)
Pop below poverty line	50% (2004 est.)
Labour force	NA
Labour force by occupation	agriculture (80%) services (20%).
Unemployment	NA (2003 est.)
Main industries	salt, cement, commercial ship repair
Exports	$64.44 million free on basis. (2004 est.)
Main partners	Malaysia 54.7%, Italy 8.8%, France 3.7% (2004)
Imports	$622 million free on basis. (2004 est.)
Main Partners	U.S. 32.3%, Italy 15.5%, Turkey 5.5%, UK 4.6%, Russia 4.4%, Italy 6.4% (2004)
Public finances [2]
Public debt	$311 million (31.2% of GDP)
External debt	$635 million (2004 est.)
Revenues	235.5 million (2004 est.)
Expenses	$373.2million including capital expenditure (2004 est.)

Contents 1 Effects of conflict with Ethiopia 2 The present 3 See also 4 External links

[edit] Effects of conflict with Ethiopia

The border conflict with Ethiopia, which lasted from 1998 to 2000 drained away substantial resources vital to Eritrea's economic development and severely damaged Eritrea's economy. GDP growth fell to zero in 1999 and to -1% in 2000. The Ethiopian offensive in May, 2000 into northern Eritrea caused approximately $600 million in property damage and loss, including losses of up to $225 million in livestock and 55,000 homes. The attack prevented planting of crops in Eritrea's most productive region, causing food production to drop by 62%.

Despite the war, Eritrea developed its transportation infrastructure, asphalting new roads, improving its ports, and repairing war damaged roads and bridges. Since the war ended, the government has maintained a firm grip on the economy, expanding the use of the military and party-owned businesses to complete Eritrea's development agenda.

[edit] The present

The Government of Eritrea states that it is committed to a market economy and privatization, and it has made development and economic recovery its priorities. Government revenues come primarily from custom duties and taxes on income and sales.

Much of the transportation and communications infrastructure that was not destroyed by the war is outmoded and deteriorating. As a result, the government has sought international assistance for a variety of development projects and has mobilized young Eritreans serving in the National Youth Service to repair crumbling roads and dams.

The economy is largely based on subsistence agriculture, which employs 80% of the population but currently may contribute as little as 22% to GDP. Export crops include coffee, cotton, fruit, hides, and meat, but farmers are largely dependent on rain-fed agriculture, and growth in this and other sectors is hampered by lack of rain and inadequate water storage. Erratic rainfall and the delayed demobilization of agriculturalists from the military kept cereal production well below normal, holding down growth in 2002-2004.

Small businesses, such as restaurants, bars, stores, auto repair, and crafts continue to thrive in the Asmara area. A brewery, cigarette factory, small glass and plastics factories, several companies involved in making leather goods, and textile and sweater factories also operate in Asmara. The textile and leather industries have made a particularly robust recovery since independence.

The Port of Massawa, destroyed by the Ethiopian Army during the final year of the war, is on its way to complete rehabilitation. With political stability and a liberal investment climate, Eritrea has begun to attract international businesses. Various U.S. and other Western concerns are planning to invest in tourism, mining, and offshore oil exploration

In the long term, Eritrea's economic future depends on its ability to master fundamental social and economic problems. These include reducing illiteracy, promoting job creation, expanding technical training, attracting foreign investment, and streamlining the bureaucracy.

[edit] See also

• Eritrea
• Banking in Eritrea

[edit] External links

• IMF Executive Board Concludes Consultation with Eritrea February 2005
• CIA World Factbook
• The Economist Intelligence Unit.