Although the Derg depended on the Soviet Union and its allies for military aid, it was just as reliant on the West for economic development and relief aid. For example, the European Community (EC) was Ethiopia's most significant source of economic aid. In the early 1980s, Western sources accounted for more than 90 percent of Ethiopia's economic aid, most of which came from the EC. Since then, communist countries had increased their proportion of total aid to Ethiopia to about 20 percent. Other multilateral and bilateral donors also had provided increased aid. For example, after refraining from giving aid to Addis Ababa between 1975 and 1981, the World Bank pledged more than US$250 million in project aid, the European Development Fund promised about US$300 million, and the International Monetary Fund ( IMF ) agreed to a loan of almost US$100 million. The regime accepted the IMF loan even though it claimed to disagree with IMF policies. Moreover, a joint venture law in 1983 and a foreign investment policy initiated in 1988 had stimulated the gradual return of private investors, although the level of such investments remained low.

Even though Ethiopia was dependent on Western economic aid, no Western donor was able to influence day-to-day economic policy on a regular basis. For instance, the Swedish International Development Authority, the United States Agency for International Development (AID), the World Bank, and other donor agencies historically had favored the development of agricultural cooperatives if they were organized on free-market principles. However, the Ethiopian regime attempted to guide the development of cooperatives so that they might be transformed into socialist collectives compatible with a centrally planned and directed economy. Like the imperial government before it, the Derg attempted to play off a multiplicity of donors against one another and thereby maximize certain benefits without surrendering its sovereignty.

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Source: U.S. Library of Congress