Privatization and Economic Growth in the Least Developed Economies: Empirical Evidences from Ethiopia

This paper examines the effect of privatization on various economic issues in the Least Developed Countries (LDCs) with reference to Ethiopia. Ethiopia, after two decades of communism, has implemented the privatization program as one of the economic reform measures targeting sustainable economic growth. The paper uses data of over 10 years, from 1994-1995 to 2003-2004, and applies correlation and regression analyses based on heterodox model, to find out the effect of the Ethiopian privatization program on economic growth. The six major economic issues selected for this study are: GDP growth, budget deficit, external debt, openness, trade and current deficit and private investment. The empirical results show that the effect of privatization on these economic variables in general is fragile, indicating the insignificance of privatization in the economic growth of the country. The study recommends that new insights and fresh-up of the privatization in terms of its size and speed, coupled with full-fledged economic reforms, are needed to make privatization influential and effective with regard to the economic issues of the country.