Ethiopia is on track to see its poverty rate rise to 43% next year, reversing hard-won gains made over the past two decades, as conflict, drought and surging inflation strain living standards, according to newly released projections.
Poverty, measured at the $3 per day international line (2021 PPP), climbed from 33% in 2016 to 39% in 2021. Economists now expect the rate to peak in 2025 before beginning a gradual decline in 2026.
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The World Bank and other monitoring sources attribute the deterioration to a combination of shocks, including the COVID-19 pandemic, the war in Tigray, erratic rainfall and a slowdown in economic growth, compounded by soaring food and fuel prices.
Rural Areas Hit Hardest
The downturn has deepened Ethiopia’s longstanding rural-urban divide. About three-quarters of the country’s 120 million people live in rural areas, where poverty reached 45.2% in 2021 compared with 15.3% in cities.
Despite higher food prices, many rural households have been unable to benefit due to limited market access and government restrictions that constrain land and labour mobility.
Human capital indicators remain weak. In 2021, 86% of rural adults had not completed primary school. Nearly half of rural households reported at least one stunted child, while more than one in four had a severely stunted child.
Access to basic services is sharply unequal. Sanitation and electricity coverage among the wealthiest 20% of households is nearly three to four times higher than among the poorest. Nationwide, 95.4% of Ethiopians lacked access to limited-standard sanitation in 2021 and 70% were without electricity.
Fewer than 1% of the poorest households possess basic assets such as bicycles, refrigerators or computers, leaving them highly vulnerable to climate and food shocks.
Reforms Bring Hope and Risk
Since mid-2024, the government has rolled out a series of macroeconomic reforms, including fuel subsidy removal, quarterly electricity tariff adjustments, tax and trade policy changes, and a shift toward a market-based exchange rate.
Officials say the reforms are aimed at stimulating private sector-led growth and enabling smallholder farmers to participate more fully in domestic and export markets.
To blunt the impact on low-income households, authorities have increased public-sector wages, raised safety net payments and subsidised fertiliser.
Sentiment among households improved slightly in early 2025 compared with the previous year, according to monitoring data, but remained negative overall, particularly in urban centres.
Outdated Data, New Survey Pending
The most recent official poverty figures are based on the 2021 Household Welfare Statistics survey, which excluded the conflict-hit Tigray region.
The survey found that 38.6% of Ethiopians, about 47.2 million people, were living below the $3/day poverty line. Under the national poverty line, 33.1%, 40.5 million people, were classified as poor. At the higher $8.30/day upper-middle-income threshold, 93.5% fell below the poverty line.
Multidimensional poverty, which assesses education and living standards alongside income, stood at 67.1%. More than a third of households had at least one school-aged child out of school, while in 26.1% no adult had completed primary education.
A new National Integrated Household Survey (NIHS), conducted between September 2024 and September 2025, is expected to provide updated data and a clearer picture of how far Ethiopia’s reform agenda can mitigate, or compound, the current poverty crisis.
