In Eritrea, economic growth has not been inclusive and sustainable. The main drivers of economic growth have been increased investments in the mining sector (largely new discoveries of gold in commercial quantities), and selective investments in capital projects. The Eritrean economy is poorly diversified as it is heavily dependent on the mining sector, which is expected to remain the main engine of economic growth over the medium-term.
The share of the agriculture sector’s contribution to GDP has remained at about 17%, largely due to weak rural infrastructure, low use of yield enhancing inputs and technologies, insufficient irrigation systems, inadequate post-harvest storage facilities, lack of skills, and extension services for support to farmers and inefficient land management systems. These problems have combined to drive low agricultural productivity and continue to constraint the country’s agricultural growth potential.
Eritrea also lies in a semi-arid zone with low and unreliable rainfall. Years of poor rainfall have led to severe droughts that have affected 60-70% of the country. These adverse climatic conditions render Eritrea very prone to droughts which in turn lead to low agricultural production and chronic food shortages. In good years, Eritrea produces only 80% of its total food needs and no more than 50% in poor years. On average, once every ten years the country is threatened with food insufficiency caused by severe droughts. Given that agriculture dominates the rural economy, increased productivity in the sector will remain a key driver and critical component of inclusive and sustainable economic growth and development. In the transition towards a more productive agriculture sector, access to reliable, affordable energy will be key, as agricultural commercialization will depend on energy for irrigation, production/aggregation, storage (both cold and dry), and processing.
Eritrea’s environmental and natural resources have been overexploited and degraded. These environmental problems were escalated during the 30-years independence war. Given the country’s insufficient energy infrastructure, biomass remains the main source of energy, especially among rural households, from which they derive 95% of their heating and cooking requirements. Biomass is unsustainable as it is increasingly becoming scarce due to deforestation and environmental degradation. It also poses high health risks, particularly to women and children in both rural and urban areas .
Key policies and governance approach
The government of Eritrea’s development agenda is elaborated in the macro policy and National Indicative Development Plan (NIDP) 2014-2018 . The Macro-Policy Document (GOE, 1994) outlines the background for Eritrea's national economic growth strategy and pursues the guiding principles of human-centred, efficient, sustainable, and equitable development. In recognition of the importance of the environment in national development, it puts emphasis on minimizing the potential environmental consequences of development decisions .
The National Indicative Development Plan 2014-18 aimed to address the country’s low agricultural productivity to contribute towards realizing Eritrea’s economic transformation agenda. Its overarching objectives were to develop robust modern irrigation-based commercial agriculture, export-oriented manufacturing sector, and a multifaceted and highly efficient tertiary services sector. Furthermore, the NIDP was committed to attaining, in the short to medium terms, the country’s SDGs through the following strategic pillars: (i) food security and development of cash crops; (ii) physical and social infrastructure, and (iii) human capital development .
Although Eritrea has not yet devised a green-growth development plan, natural resource management and averting land degradation are key priority areas for the country. The country has also adopted various international environmental laws and policy guidelines, including, among many others, the Environmental Management Plan for Eritrea, the National Action Program to Combat Desertification and Mitigate Effects of Drought, and the National Biodiversity Strategy and Action Plan .
Eritrea’s Nationally Determined Contribution (NDC) moves away from fossil fuels, and identifies key mitigation actions in the energy sector, which will focus on the promotion of renewable energy such as solar, wind and geothermal power, and the development of energy efficiency in household and transport subsectors , .
Successes and remaining challenges
The economic performance of Eritrea presents a mixed picture characterised by weak fiscal policy frameworks and challenges in the overall public sector governance largely due to weak institutional and human capacities.
Agriculture and water and sanitation infrastructure deficiencies continue to undermine the country’s inclusiveness by slowing the transformation of the Eritrean economy, which is heavily dependent on the mining sector. In addition, the country lacks reliable and comprehensive national statistics to guide in the design of strategic plans, decision making, and monitoring and evaluation of program implementation and results.
The country’s infrastructure challenges, a dominant public sector, restrictive economic and financial policies, and skills gaps, continue to undermine the existing potential in agri-business and agro-processing, manufacturing enterprise growth and employment creation and, therefore, curtail private sector development .
Initiatives and Development Plans
The Eritrean People’s Sovereignty Movement proposed a macro-economic policy framework for the country’s inclusive and sustainable development. The document wishes to provide strategic direction to accelerate sustainable growth in Eritrea. It includes four overarching themes to guide the Vision 2030: (i) Human Capital Development; (ii) Inclusive Economic Growth; (iii) Green Economy and Environmental Protection; and (iv) Constitutional Law and Respect for Human Rights .
Goals and Ambitions
Eritrea’s long-term development objective is to attain rapid and widely shared economic growth with macroeconomic stability, and steady and sustainable poverty eradication. The aim is to promote equitable economic growth and development through developing exports, increasing agricultural productivity, attracting investment in fisheries, tourism, construction, manufacturing, and developing a strong financial sector. In order to achieve this aim, the government wants to expand and modernize the country’s basic infrastructure. Moreover, Eritrea envisages to become a climate change responsive country with equitable economic growth by ensuring a rapid transition to a carbon free economy .
- The country’s large and growing youthful population, if properly harnessed, can yield huge economic dividends for the country. However, the high migration of youth to various areas in the world in search of a better life remains a major challenge for the country.
- Tourism and commercial deposits of several minerals: These sub-sectors are potential sources of the country’s much needed foreign exchange and opportunities for sustainable and quality job creation. Several commercially viable minerals at the Bisha Mine have already attracted several external mining investment companies.
- Eritrea’s investments in developing the sea ports have the potential to spur high business and investments and contribute to transforming the country into a regional trading and business hub. Thus, Eritrea’s active participation in regional integration (RI) activities under IGAD and COMESA has the potential to increase the country’s intra-regional trade and also support the development of its transformative regional infrastructure.
- Eritrea’s NDC sets ambitious targets with clear requirements for additional finance. Climate finance, including funds from the Green Climate Fund, may potentially be accessed.
 Amakobe Sande and James Wakiaga (2021). Renewable energy Eritrea’s best bet to a resilient future. [Online]. Available: https://www.un.org/africarenewal/magazine/december-2021/renewable-energy-eritreas-best-bet-resilient-future.