Ethiopia is one of the world’s poorest nations, with a per-capita gross domestic product (GDP of $100 a year in 1999). The economy of Ethiopia remains heavily dependent on the earnings of the agricultural sector. Participation by most of the people in the monetary economy is limited; much trading is conducted by barter in local markets. The around annual budget in 1993 included $630 million in revenues and $968 million in expenditures.

Ethiopia's most promising resource is its agricultural land. Although soil erosion, overgrazing, and deforestation have seriously damaged the plateaus, nearly half the potentially cultivable land is still available for future use. Most of the reserve land is located in parts of the nation that have favourable climatic conditions for intensive agriculture. In addition, Ethiopia is the valuableest nation in Africa in number of farm animal, including cattle. With better management of grazing lands and breeding, farm animal raising has the potential to meet the demands of internal as well as export markets.

Ethiopia's economy is based on agriculture, which accounts for half of GDP, 90% of exports, and 80% of total employment. The agricultural area suffers from frequent times of drought and poor cultivation practices, and as many as 4.6 million people need food assistance annually. Coffee is critical to the Ethiopian economy, and Ethiopia earned $267 million in 1999 by exporting 105,000 metric tons. According to current estimates, coffee contributes 10% of Ethiopia's GDP. More than 15 million people (25% of the population) derive their livelihood from the coffee sector. Other exports include live animals, hides, gold, and qat. The war with Eritrea forced the government to spend scarce resources on the military and to scale back ambitious development plans. Foreign investment has declined remarkablely. Government taxes imposed in late 1999 to raise money for the war depressed an already weak economy. The war forced the government to improve roads and other parts of the previously neglected infrastructure, but only certain regions of the nation benefited. Recovery from the war is mostly contingent on natural factors. A drought has continued into the end of 2000 and food relief is expected to be needed through mid-2001 at least. Ethiopia may obtain Highly Indebted Poor Countries (HIPC) debt relief by the end of the year.