After seventeen years of military rule, Marxist-Leninist socialism, growing economic problems, and escalating civil war, the Ethiopian president, Mengistu Haile Mariam, fled the country on 21 May 1991. One week later, on 28 May, after unsuccessful peace negotiations in London, The Ethiopian People’s Revolutionary Democratic Front, (EPRDF), took power by walking into a largely undefended Addis Ababa. In the first week of July the new leaders called for a National Conference on Peace and Democracy where the institutional frame for the immediate future of Ethiopia was discussed with representatives from the various liberation movements. It was decided that the United Nations Universal Declaration on Human Rights should be applied in Ethiopia. Furthermore, it was decided that a transitional government, consisting of a council of representatives and a council of ministers, should rule the country for the two coming years of transition. This transitional period is to be terminated when there has been a democratic election of a new parliament and a resulting new democratic government. By the same time the Eritrean people are to be given the right to decide on their country’s future status of being a sovereign state or continuing to be a region within Ethiopia.
It is worth noting that the transitional parliament, the Council of Representatives, with eighty-seven representatives, consists of members from various ethnic groups, regional movements and political organizations. Thus, in a sense, Ethiopia today is a country that has taken a leap from being a one-party state led by one person, Mengistu Haile Mariam, to become a multiparty state which has entered on the path towards democracy.
The above-mentioned political change has resulted in expectations for changes in the Ethiopian economic system. As will be shown below, during the past seventeen years of socialist rule the Ethiopian economy has developed from a problematic but relatively stable and balanced macroeconomic situation to an economy in heavy distress. As in most other socialist countries, economic realities have led to the conclusion that economic