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1.1 The Natural Resource Base and the Rural Environment
Natural resources are the foundation of the economy. Smallholder peasant agriculture, in some areas including forestry, is the dominant sector accounting for about 45 per cent of the GDP, 85 per cent of exports and 80 per cent of total employment. Agriculture has also been the main source of the stagnation and variability in GDP growth caused in the main by policy failures and exacerbated by recurrent drought, civil war, natural resource degradation, and poor infrastructure.
Renewable natural resources, i.e. land, water, forests and trees as well as other forms of Biodiversity, which meet the basic needs for food, water, clothing and shelter have now deteriorated to a low level of productivity. In many areas of highland Ethiopia, the present consumption of wood is in excess of unaided natural sustainable production. Estimates of deforestation, which is mainly for expansion of rainfed agriculture, vary from 80,000 to 200,000 hectares per annum.
The burning of dung as fuel instead of using it as a soil conditioner is considered to cause a reduction in grain production by some 550,000 tonnes annually. In 1990, accelerated soil erosion caused a progressive annual loss in grain production estimated at about 40,000 tonnes, which unless arrested, will reach about 170,000 tonnes by 2010. Livestock play a number of vital roles in the rural and national economy but according to one estimate some 2 million hectares of pasture land will have been destroyed by soil erosion between 1985 and 1995. Land degradation is estimated to have resulted in a loss of livestock production in 1990 equivalent to 1.1 million tropical livestock units (TLUs), and, unless arrested, will rise to 2.0 million TLUs or to 10 per cent of the current national cattle herd by 2010.


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