Economy - overview: Since formal independence from Ethiopia in 1993, Eritrea has faced many economic problems, including lack of financial resources and chronic drought, which have been exacerbated by restrictive economic policies. Eritrea has a command economy under the control of the sole political party, the People's Front for Democracy and Justice. Like the economies of many African nations, a large share of the population - nearly 80% in Eritrea - is engaged in subsistence agriculture, but the sector only produces a small share of the country's total output.
Since the conclusion of the Ethiopia-Eritrea war in 2000, the government has expanded use of military and party-owned businesses to complete President ISAIAS's development agenda. The government has strictly controlled the use of foreign currency by limiting access and availability; new regulations in 2013 aimed at relaxing currency controls have had little economic effect. Few large private enterprises exist in Eritrea and most operate in conjunction with government partners, including a number of large international mining ventures, which began production in 2013. In late 2015, the government of Eritrea introduced a new currency, retaining the name Nakfa, and restricted the amount of hard currency individuals could withdraw from banks per month. The changeover has resulted in exchange fluctuations and the scarcity of hard currency available in the market.
While reliable statistics on Eritrea are difficult to obtain, erratic rainfall and the percentage of the labor force tied up in national service continue to interfere with agricultural production and economic development. Eritrea's harvests generally cannot meet the food needs of the country without supplemental grain purchases. Copper, potash, and gold production are likely to continue to drive economic growth and government revenue over the next few years, but military spending will continue to compete with development and investment plans.
Definition: This entry briefly describes the type of economy, including the degree of market orientation, the level of economic development, the most important natural resources, and the unique areas of specialization. It also characterizes major economic events and policy changes in the most recent 12 months and may include a statement about one or two key future macroeconomic trends.
Source: CIA World Factbook - This page was last updated on July 9, 2017