| Abstract: | Private sector development in Ethiopia is at its lower level. Public sector
involvement is large. In light of this, the main objective of this study was to
describe the current status of Private sector in the economy. The data used in
this study was obtained from survey conducted on private investment and its
challenges in Ethiopia and from National Bank of Ethiopia, MoFED,
Ethiopian Statistical Agency, Ethiopian Investment Agency, IMF and the
WB. To analyze the data, OLS method of estimation and descriptive statistics
were used. A total of three explanatory variables were identified and
included in the model out of which private and public investment were found
to be statistically significant. The results, which support the endogenousgrowth-
type model, indicated that the impact of increases in private
investment on growth is large and significant, the increase in the net public
investment, have a negative impact on growth and the increase in the active
labor force has a positive impact on growth (positive externalities). The
findings of the study imply that public policies should be supportive to the
growth of private sector i.e. growth is boosted by economic policies that
foster external competitiveness and a prudent fiscal stance. |
