Traditionally, agriculture was the norm in the plateau region and in the north and west where rainfall was sufficient. In the drier coastal plain and the arid regions of the north and west, livestock raising predominated. Italian and British colonial policy in the 19th and early 20th centuries favored the production of raw materials for export. During this period, light industry was developed. By most accounts, Eritrea enjoyed a higher level of economic development than Ethiopia at the time of the 1952 federation. Ethiopia’s annexation of Eritrea caused industrial expansion to be curtailed, and many factories were closed and moved to Ethiopia. After 1974, the Marxist government of Ethiopia placed most Eritrean industry under state control.
Eritrea’s economy suffered massive damage and dislocation as a result of drought, famine and the war with Ethiopia that began in the 1960s. At the time of independence in 1993, the country’s industrial base was shattered and an estimated 75 percent of the population depended on food aid. After good harvests in 1991 and 1992, the harvest of 1993 was a disaster, with more than 80 percent of the grain crop lost because of pests and the lack of rain. Eritrea’s transportation network was also severely damaged. Most roads are unpaved, and those that were paved received little maintenance. The railway linking the port of Massawa to Asmara and to Keren and Ak’ordat was scarcely functional by the end of the war.
Eritrea faces daunting economic problems. Recovering from war, resettling of people, attaining food self-sufficiency, and rebuilding transportation infrastructure all demand careful planning and allocation of scarce resources as well as international assistance. The government pledged to encourage capitalism, and began the process of privatizing the state sector. Eritrea’s unit of currency is the nakfa (7.20 nakfa equal U.S.$1; 1998).
An international airport is located in Asmara. A single, government-owned radio station serves Eritrea, and television service was initiated in 1993 for Asmara. The government publishes the newspaper Hadras Eritrea (New Eritrea) in Arabic and Tigrinya.