Eritrea is located in Eastern Africa, bordering the Red Sea between Djibouti and Sudan. A former Italian colony, Eritrea was occupied by the British in 1941. The UN awarded Eritrea to Ethiopia in 1952 as part of a federation. Ethiopia's annexation of Eritrea as a province 10 years later sparked a 30-year armed struggle for independence that ended in 1991 with Eritrean rebels defeating governmental forces; independence was overwhelmingly approved in a 1993 referendum.

"The border stalemate between Eritrea and Ethiopia continues to hamper the economic situation in the country, while the failure of rains and the high food prices pose an additional burden to the humanitarian situation in Eritrea, which is already being made vulnerable by poverty, chronic food insecurity and malnutrition. Recently, the poor performance of the short rains and the delayed onset of the main rainy season are raising concerns for a looming drought:  Eritrea is located in a drought-prone area and is still suffering from the impact of the previous drought in 2006. Those particularly at risk are the estimated 85,500 malnourished children; 300,000 pregnant and lactating women; an estimated 800,000 urban poor and the population living in drought-affected areas, requiring close situation monitoring and assistance. Mine and unexploded ordnance accidents have increased significantly since 2007, requiring accelerated efforts in mine-risk education in the affected areas." UNICEF - 2011

Eritrea's inability to provide enough food means that two thirds of the population receive food aid. Moreover, economic progress is hampered by the proportion of Eritreans who are in the army rather than the workforce.  Agriculture and pastoralism are the main source of livelihood for about 80% of Eritrea’s population. Besides agriculture, Eritreans earn a living through casual work. However, due to national conscription, there is an absence of younger men engaged in normal productive activities, such as ploughing and weeding, and this is exacerbating food insecurity at the household level. 

The agricultural sector is dependent upon Eritrean rainfall and accounts for only one-fifth of the gross domestic product (GDP).  The Ethiopian-Eritrea war severely hurt Eritrea's economy, GDP growth fell to zero in 1999 and to -12.1% in 2000. Eritrea's economy depends heavily on taxes paid by members of the diaspora.  The Government continues to place its hope for additional revenue on the development of several international mining projects. 

Eritrea's economic future depends upon its ability to master social problems such as illiteracy, unemployment, and low skills, deal with environmental degradation, climate change and the government's willingness to support a market economy.

The Eritrean Government has given high priority to environmental recovery efforts, through extensive tree planting and physical conservation measures such as the terracing of hillsides. This strategy aims to reduce the loss of top soil, recharge groundwater, and generate a sustainable forestry resource. 

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