Ethiopia’s Road to Middle-Income Status Runs Through Its Cities

Cities Alliance has given the green light to develop and leverage financing for an Ethiopia Country Programme that will support secondary cities in establishing an urban land management system and promote gender equity.

How does a developing country achieve middle-income status? To Ethiopia, a member of the Cities Alliance since 2006, the path is clear: through well-managed, equitable and sustainable cities that drive the country’s economic growth.

This approach underscores Ethiopia’s emergence as one of the most dynamic African economies. Currently one of the least urbanised countries in Africa, Ethiopia’s urban population has doubled over the past 35 years, from 8.5 per cent to 17.4 per cent. Its cities now produce up to 60 per cent of the country’s GDP, and the quality and efficiency of these cities will make an ever-increasing contribution to Ethiopia’s economy over the long term.

To achieve its goal, the Ethiopian government has launched several initiatives, including a National Development Plan, the first five-year Growth and Transformation Plan, and the Ethiopian Cities Prosperity Initiative (ECPI).

As a complement to these initiatives, the Cities Alliance has given the green light to develop and leverage financing for an Ethiopia Country Programme (ECP). The programme will support key secondary cities in establishing an urban land management system to enable inclusive city growth. It will also focus on gender equity to help Ethiopia’s women build economic power, increase their civic participation and voice, and advance their rights in cities.

Identifying the challenges

In the early stages of developing the ECP, Ethiopia identified secondary cities, urban land management, and gender equity as three areas critical to promoting economic growth that presented particular challenges.

While the capital of Addis Ababa remains the largest urban area, secondary cities and towns are growing especially fast. These cities are attracting more people and commercial investment, but at the same time lagging behind in formal job creation with few opportunities for the poor. Much of the urban growth in the secondary cities is informal. An estimated 70 to 80 per cent of the urban population in Ethiopia live in what would be classified as slums – one of the highest levels in Sub-Saharan Africa.

At the heart of the proposed Ethiopian Country Programme is the idea that cities and their equity, efficiency, cohesion and productivity will play a pivotal role in realising the economic and social transformation of the country.


Urban land management is another significant challenge. Cities are not able to provide the amount of serviced land needed to keep up with the fast pace of urban growth, and it is difficult to access land for affordable housing. The Ethiopian government has undertaken several initiatives in the past to address these issues, but more remains to be done. 

One of the more innovative initiatives is being undertaken in partnership with New York University (NYU). The Urban Expansion Initiative, pioneered by Professor Solly Angel, helps local governments anticipate their future population growth (in this case to 2040), and to undertake cost-effective planning for service provision in advance.

There are very few examples of local and national governments planning for urbanisation, which is why this initiative is so significant. As the Cities Alliance has pointed out on many occasions, the default position in most cities and countries is to plan after the event, leading to the massively expensive and socially disruptive retrofitting of services. 

Another way Ethiopia is trying to foster broad-based economic growth is through gender equity. There is a significant gender gap when it comes to the urban economy; the unemployment rate among women is twice as high as that of men, and women tend to earn 50 per cent less. Microenterprises owned by women earn only a fraction of those owned by men, and women face larger barriers for doing business.

A programme tailored to Ethiopia’s specific needs

Working closely with partners and other Cities Alliance members, the Ministry of Housing, Urban Development and Construction (MHUDCo) developed a framework for a Country Programme that would address the three major challenges outlined above at all levels: national, local and community. 

The programme comprises four major components that will support Ethiopian cities in: 

  • Building institutional capacity and effective, transparent urban land management systems. Activities will include mobilising international expertise to support cities in designing, installing and operate comprehensive, modern systems, and incorporating land expansion into urban planning curricula.
  • Increasing significantly the number of low-income households with secure tenure and access to affordable housing. Activities in this area will support the formulation and implementation of pro-poor housing policies, targeted capacity building for urban planners, and effective condominium management. 
  • Implementing climate-resilient, integrated urban infrastructure design and operation through local capital investment programmes. Activities include direct technical assistance and training to ensure that local authorities gain knowledge of best practices, such as through study tours.
  • Strengthening gender responsive urban governance to ensure inclusive urban growth.  Activities include surveys and peer reviews of existing local government operations, strengthening the Ethiopian Cities Association through urban fora, and the development of policies to promote social inclusion. 

The ECP will be implemented by MHUDCo and its national development partners, notably the Ethiopian Cities Association. Cities Alliance members UN-Habitat and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) will take a leading role, along with New York University.

Building on Cities Alliance activities

Cities Alliance has a strong history in Ethiopia. Over the past 16 years, the partnership has supported 10 grants in various areas, including the development of the Ethiopian Cities Network, an urban database, city development strategies, and technical support for a major government housing initiative.  

The Ethiopia Country Programme will build on various Cities Alliance investments in the country, including the Ethiopia Urbanisation Review; the State of Ethiopian Cities initiative; and two activities funded by the Bill & Melinda Gates Foundation and managed by the Cities Alliance, the Improving Municipal Revenues through Property Taxation in Secondary Cities in Ethiopia and Leveraging Urban Spending to Maximise Benefits to the Urban Poor (LUSUP) initiatives. 

In addition, the Cities Alliance will use its global networks to actively link Ethiopia into a wide range of capacity-building and substantive policy dialogue initiatives. While not funded by grants, these engagements are an active part of the Country Programme.