Eritrea's economy: emigrants' money and conscripts' labour

Why Eritrea's economy is read from outside

Eritrea has never conducted an official census, and BTI's 2026 country report records that no state budget has been made public since independence in 1993 and that government spending goes unaudited. The World Bank has released no growth figure for the country since 2011. An IMF team that held talks in Asmara in May 2019, the first Article IV consultation in ten years, found that "the information base of economic developments in Eritrea has deteriorated". Key informants told Tanja Müller that same month that ministries no longer had planned budgets and asked for money as the need arose.

What exists instead is a set of estimates made outside the country, and they often fail to agree. The African Development Bank put growth at 2.9% in 2024 and 3.2% in 2025, with inflation easing from 7.5% to 5.3% and current account surpluses of 12.4% and 13.2% of GDP in those years, and noted in June 2026 that its latest analysis of Eritrea's debt was not public. BTI reports that the IMF published no inflation rate for Eritrea in 2024, for lack of data.

The poverty row shows the gap most plainly. The World Bank's latest survey figure dates from 1996/97, and the African Development Bank's estimate of 53 to 60% in 2026 comes with a note that low inequality in Eritrea reflects "widespread shared poverty". Much of the remaining detail comes from reports on governance and human rights.

How the diaspora pays into Eritrea

What the tax is tied to at the embassy

The UN commission of inquiry described the levy in June 2015. Eritreans abroad, it found, could get a passport only by paying a mandatory "rehabilitation tax" of 2% of their earnings, and those who had left unlawfully also had to sign a regret form. The special rapporteur's report of May 2026 found the arrangement still running under its full name, the Recovery and Rehabilitation Tax. Most of the Eritreans who spoke to him said those abroad were still subject to it and still had to sign a letter of regret to get passports, birth and marriage certificates, academic records and sometimes the papers to bury a relative who had died abroad. Relatives inside Eritrea, he added, faced harassment or detention when someone abroad did not comply.

BTI adds that the tax is levied even on social welfare benefits paid by Western governments. Germany's Federal Administrative Court held in October 2022 that Eritreans with subsidiary protection need not get an Eritrean passport if doing so means signing such a declaration, and Switzerland's Federal Supreme Court ruled in October 2025 that a letter of regret could not be required for residence documents.

The government's account runs the other way. Wikipedia records that it accuses Western governments of luring Eritreans abroad with asylum, and that it has refused foreign aid since 2005 as a hindrance to development, turning down US$200 million in aid and a US$100 million World Bank loan in 2006 alone.

How money from abroad reaches households

Private remittances are a separate flow and for most families the larger one. BTI calls them "the most important source of income for the population", carried mostly through informal hawala networks in a country with no electronic payments, and its 2026 report puts diaspora remittances at more than a third of the national budget. The money pays for consumption and little else, BTI finds, because earning a living through business has become almost impossible.

The state and the party collect through channels of their own. The EPLF renamed itself the People's Front for Democracy and Justice (PFDJ) in 1994, and the PFDJ runs Himbol Financial Services, which handles remittances and tax payments gathered by embassies, consulates and appointed "money collectors". The Martyr's Trust Fund raises money abroad for the families of soldiers killed in action. During the war with Ethiopia from 1998 to 2000, the former official Fathi Osman has said, the government sold war bonds to the diaspora because it had no other means of paying for the fighting.

Emigrants also come back to spend. Sources from 2015 cited by Wikipedia found that most tourists were members of the diaspora, and Müller wrote in 2019 that national service recruits had partly built flats in Asmara for diaspora Eritreans while local professionals waited on long lists for government housing.

Who does the work in national service

How long service lasts and what it pays

Proclamation 82 of October 1995 set national service at 18 months for every able-bodied man and woman, six of them in military training, and since 2002 the Warsai Yikealo Development Campaign has sent students to begin that training in twelfth grade. From 1998 the term had no end. Wikipedia's account says everyone under 50 is enlisted until a commander releases them, and BTI's 2026 report says men aged 18 to 60 and women aged 18 to 27 are compelled to serve. A UN Human Rights Council report of June 2016 put the average length of service at 6.5 years.

Wikipedia's article on conscription, which opens from a State Department information sheet of October 2007, gives the pay as no more than $30 a month. The commission of inquiry found in 2015 that some judges were conscripts on less than $2 a day, and BTI describes much of the administration as staffed by recruits working "for pocket money".

The programme's stated aims are economic: in Wikipedia's account, to make up for Eritrea's lack of capital and cut its dependence on foreign aid. The government gave Ethiopia's hostility and occupation of Eritrean land as the reason for its length, and the policy stayed the same after the peace of 2018.

Where the conscripts are put to work

The commission of inquiry concluded in June 2015 that "the use of forced labour is so prevalent in Eritrea that all sectors of the economy rely on it", and that the government profited when conscripts were "lent" to foreign companies that paid it considerably more in salaries than it passed on to the workers. Freedom House's report for 2024 describes "compulsory, unpaid labor for enterprises controlled by the political elite".

BTI names where the labour goes. Private construction has been banned since 2006, which leaves the sector to party-owned firms such as Seghen Construction, and Seghen uses conscripts as forced labour. The army runs cash-crop farms worked by conscripts, mostly in Gash-Barka, on land taken without compensation. High school graduates have been drafted into routine administrative work since 2002, and recruits build dust roads and micro-dams. Wikipedia counts 187 dams of more than 50,000 cubic metres and 600 micro-dams built since independence, and under the Wefri Warsay Yika'alo programme a coastal highway of more than 500 kilometres was laid between Massawa and Assab.

Many conscripts leave. The commission estimated in 2015 that about 5,000 people were leaving Eritrea each month, and the UN refugee agency counted about 507,300 Eritrean refugees at the end of 2018. Freedom House found in 2024 that conscription "denies much of the working-age population the opportunity to establish and run their own businesses".

What farms and fisheries still provide

Farming is how most Eritreans live and a small part of measured output. Agriculture employed nearly 80% of the population in 2004 and produced 12.4% of GDP, by Wikipedia's figures, and FAO put its share at 15% in 2003. The World Bank gives rain-fed farming about a third of the economy and blames droughts, with falling mine output, for an average contraction from 2015 to 2018 before a recovery of around 12% in 2018. BTI reports that national service takes people away from the subsistence farming and herding by which an estimated 80% of Eritreans live, and that the general mobilisation of autumn 2022 was still in force in January 2025.

Sorghum, millet and teff are the staple grains, in Britannica's account. The land reform of 1994 declared all land state property, and highland farmers usually hold rights of use under customary law. BTI reports that farm labourers and merchants risk confiscation if they carry produce from one zoba, or region, to another, and that the military sells what it seizes on the black market. Wikipedia records that almost a quarter of the most productive land remained unoccupied after the war of 1998 to 2000.

The rain still settles the harvest. FAO's early warning service reported that rainfall in the Kiremti season of June to September 2026 was 20 to 40% below average in Anseba, Debub, Maekel and Gash Barka, and expected significant shortfalls in Gash Barka, the main crop area. The sea is a smaller earner: fish exports were about 14,000 tonnes in 2002, according to Wikipedia, against a maximum stable yield put at nearly 80,000 tonnes.

Where Eritrea's industry came from

Eritrea's industrial base was laid under Italy. The railway reached Saati in 1888 and Asmara in 1911, and in 1939 there were around 2,198 factories in the colony, most of their workers Eritrean, making buttons, cooking oil, pasta, building materials, tobacco and hides. After the Italian Empire was declared in May 1936, Rome chose Eritrea as the industrial centre of Italian East Africa.

Much of that was gone within a decade. The fighting of 1941 heavily damaged the industrial areas, the British removed several Italian-built industries to Kenya as war reparations, and war factories that had employed thousands closed after 1945. UN Resolution 390A(V) of 2 December 1950 then federated Eritrea with Ethiopia and gave the imperial government currency, finance and foreign commerce. During the federation, industrial capacity largely moved to Ethiopia and left Eritrean plants with outdated equipment.

Britannica describes the manufacturing that survives as mostly the processing of farm produce into food, beer, tobacco products, textiles and leather, centred on Asmara, and notes that the skills it taught Eritrean workers later let many of them find work abroad. Industry made up 25.3% of GDP in 2003, by Wikipedia's figures, and BTI's 2026 report says the sector built under Italian rule "continues to form the heart of the country's industrial production".

Power is short. An 88 megawatt plant just south of Massawa, paid for by Saudi Arabia, Kuwait and Abu Dhabi, was finished in 2003. The World Bank counted about half of Eritreans with electricity in 2022, a figure BTI doubts because supply was unreliable even in Asmara.

After the fall of the Derg in 1991 the EPLF, by Wikipedia's account, committed itself to a free-market economy. BTI's 2026 report finds that the political leadership "has ruled out a market economy as a viable model for the country".

What Bisha and the Asmara deposits produce

Bisha, in Gash-Barka in the west, opened in 2011 as a joint venture between the Canadian company Nevsun Resources and the Eritrean state, mining gold first, with copper and zinc to follow once the gold ore was exhausted. Wikipedia attributes part of the rise in growth in 2013 to its full operation, and Britannica records both the concerns human rights groups raised about the welfare of its workers and the wave of foreign mining investment its profits set off. Zijin Mining of China bought 60% of Bisha in 2019 and now holds 55%, with the Eritrean National Mining Corporation (ENAMCO) holding 45%. In 2025 the mine produced 83,000 tonnes of zinc, 23,000 tonnes of copper and 63.4 tonnes of silver. BTI calls copper from Bisha "the only source of stable income" in the economy during its review period.

The Asmara project is four deposits around the capital, at Emba Derho, Adi Nefas, Gupo and Debarwa; Debarwa was mined briefly in the 1980s until the independence war closed it. The Asmara Mining Share Company, 60% owned by Sunridge Gold and 40% by ENAMCO, signed a 20-year mining agreement on 11 September 2015, and Sichuan Road and Bridge bought Sunridge's 60% for US$65 million in April 2016. China Eximbank signed a loan of US$260 million for the first phase in February 2023. High-grade copper from Debarwa is crushed, packed into containers and trucked 120 kilometres to Massawa for a smelter in China, and the first shipment left in April 2024. Over a planned life of 17 years the project expects 381,000 tonnes of copper and 850,000 tonnes of zinc.

Every licence runs through the state. BTI reports that foreign companies must form joint ventures with ENAMCO to mine, that China is the one foreign investor still active after Canadian and Australian firms sold out, and that mining revenue since 2011 has gone unaudited. The Afar around Colluli have raised concerns that their customary rights to the land may be set aside once the joint venture there starts work.

How the nakfa came to be fixed

What the new currency broke with Ethiopia

Until November 1997 Eritrea used the Ethiopian birr, and trade between the two ran mostly one way: more than 65% of Eritrea's exports went to Ethiopia, against 9% of Ethiopia's to Eritrea. Eritrean exchange bureaux offered rates for hard currency well above Ethiopia's, in breach of the currency union. The Assab refinery, which the Soviet Union had built for Ethiopia, became a dispute when Eritrea asked for 56 million birr in hard currency towards its modernisation; Ethiopia refused and rerouted its fuel through Djibouti and Mombasa, and by August 1997 the refinery had closed.

When the nakfa was introduced in November 1997, Eritrea proposed that it be treated as equal to the birr in bilateral trade. Ethiopia insisted on hard currency, and the break in commerce fell hardest on the side that sold most of its goods across the border. The war began in May 1998, and the history article follows it from Badme to The Hague.

How the fixed rate reaches cash and banks

In early 2005 the government decreed that every transaction be made in nakfa and made it illegal for individuals to hold foreign currency, and from 1 January 2005 it set the rate at 15 nakfa to the US dollar. The African Development Bank recorded the same rate in 2026, and BTI calls the nakfa "severely overvalued" at it. In November 2015 every citizen had to exchange old notes for new ones; the World Bank links the contraction in money that followed to the deflation of 2016 to 2018, and BTI reports that cash has been hard to get ever since.

The US State Department's travel advice in 2026 describes a cash economy with no ATMs, where credit cards are accepted nowhere, money may be changed legally only at a branch of Himbol and visitors may take no more than 1,000 nakfa out. BTI lists three state-controlled banks, reports that private banks are prohibited and withdrawals severely restricted, and calls the cheque "the most modern money-transfer method allowed".

Who controls trade inside and across the borders

BTI's account gives the import and export trade to the party. The PFDJ-owned Red Sea Corporation controls it, and the Hdri Trust Fund controls every relevant company in the country while being audited by one person, the party's head of finance. In 2021 the United States sanctioned the PFDJ, the Red Sea Trading Corporation and the Hdri Trust Fund over Eritrea's part in the war in Tigray. BTI also describes a contraband trade run largely by army officers, with Tessenei on the Sudanese border as a hub. The official trade on record is small: in 2011 Eritrea imported goods worth US$899.9 million and exported US$415.4 million.

The land borders open and shut with politics. After the peace of 2018 the crossings with Ethiopia opened in September, and Müller found Eritreans driving into Mekelle that October to buy cement, which the government controls at home. A baker she knew near the Sudanese border had been close to bankruptcy after Sudan, where he bought his flour, closed its border in January 2018. All the crossings with Ethiopia closed again from April 2019, and BTI reports no trade between the two since. The UN Security Council lifted its sanctions of 2009 and 2011 in November 2018, and the World Bank's lending programme stays inactive because of repayment arrears.

Eritrea belongs to COMESA, had not signed the African Continental Free Trade Area agreement by July 2020 and is missing from the list of 50 states that had ratified it by 4 September 2026, as Eritrea: politics sets out. Tourism has moved with the wars: arrivals counted by the World Bank fell from 410,000 in 1997 to 57,000 in 1999 and stood at 142,000 in 2016. The Ministry of Information wrote in October 2024 that the government had been building up tourism in spite of "adverse externalities that stem from periodic and imposed wars and unwarranted sanctions".