Poverty is a major concern and an important issue in Ethiopia. It is a chronic problem exacerbated by war, draught and inappropriate policies. According to analyze of the combined 1995/96 Household Budget Survey and the 1996 Welfare Monitoring Survey 11 45.5 percent of the population were falling the poverty line. About 47.5 percent of the rural population fell below the poverty line while the corresponding figure for the urban population was 33.2 percent. As in the case of a number of African countries which undertook the Social Dimensions of Adjustment (SDA) program, the issue of welfare monitoring in Ethiopia arose as part of the Economic Reform Program (ERP) currently being undertaken in the country. The ERP specifically and strongly underlies the effects of the reform program on poverty and the analytical capacity of the government to monitor such effects. To this end, a Welfare Monitoring System (WMS) was set up by the government by mid 1994. In view of the wider context of the problem, the establishment of the WMS, as justified above, is envisaged to consist major elements such as establishing an information system that provides a continuous picture of the poverty scenario in the country, indicate the impact of reform programs on the level of household welfare, establish follow-up procedures on the various programs and activities targeted towards poverty alleviation and conduct regular statistical surveys to assess in particular the efficiency of targeted programs.