Paying the price of war

Ethiopian schools have suffered during the two-year war

By Ishbel Matheson

Ethiopia's economic prospects are dire following the two-year border war with Eritrea, according to extracts of a draft report seen by the BBC.

Ethiopia is one of the poorest countries in the world, but it is fighting a war which, according to western diplomats, costs around $1m a day.

Now, the full impact of the war is emerging.

The draft report, prepared by the IMF and international donors in conjunction with the Ethiopian Government, paints a gloomy picture on the country's economic outlook.

The public expenditure review says that, while defence spending has increased, funding for key sectors, like health and education, has declined.

It says the dispersal of funds for capital expenditure to Ethiopia's regions has fallen by as much as 40%. According to sources, what this means in practice is that schools and health clinics are not being built.

'Missed opportunities'

There is also no money to carry out essential development projects, such as those aimed at alleviating the chronic drought which affects millions of Ethiopians across the country.

The report notes that the missed opportunities in terms of development could multiply rapidly, the longer the conflict persists.

Ethiopia's economic difficulties have been compounded by the refusal of many Western donors to fund aid projects in a nation at war.

Ethiopia has responded angrily to this, saying that Ethiopia was invaded by Eritrea, and that even poorer nations have the right to defend their sovereignty.

However, as this report makes clear, defending national pride is costly and the longer the war persists the more acute the economic crisis will become.