This report presents an update on the economic challenges facing Ethiopia with a focus on the shared goal of accelerating equitable growth. The starting point is the Government's own Plan for Accelerated and Sustained Development to End Poverty (PASDEP), which is in the process of finalization, and is designed to cover the period 2005-2010. This report proposes that the growth strategy should more explicitly adopt a "two-legged" approach that would both (a) consolidate and deepen an essentially balanced, broad-based and inclusive growth strategy and (b) adopt a more selective approach to speed up growth, allowing for identification and support for dynamic new activities, based on private and public sector discoveries, innovations, and partnerships. This report suggests ways forward to complement and strengthen the PASDEP. It brings together recent analysis and thinking from a range of sources, to put forth a storyline and key elements of the strategy in Part I. The second part provides a series of chapters on key themes - viz. recent and longer term economic developments, rural development, the private sector, the infrastructure challenge, and the institutions and governance. The report seeks to provide adequate coverage of the major challenges facing Ethiopia in its efforts to accelerate equitable growth, drawing on work across a range of themes including the Institutional and Governance Review.