In current periods Ethiopia has been implementing huge investment on electricity.rnThe studies on the economic impact of this investment conducted so far, however, arernnot slifjicient and no study is conducted by using a recursive dynamic CGE model. Tornthis effect, the study used a recursive dynamic CGE model. The model used anrnupdated version of 2005106 SAM The simulations examined to explore the impact ofrnthis investment on Ethiopian economy are investment on electricity fidly financed byrnforeign saving (loan), investment on electriCity fidly financed by domestic householdsrnand ente/prise saving, and investment on electricity partly financed by domesticrnhousehold and enterprise saving and partly by foreign saving. We run thesernsimulations in combination with increase in TFP of industrial and service sectors.rnThe findings of the study have shown the improvement of the real GDP, output ofrnindustrial and service sectors, average factor income and household income.rnHowever, the high growth of real GDP is registered when the investment onrnelectricity is fully financed by domestic household and enterprise saving and whenrnthis investment is partly financed by domestic non government institutions and partlyrnby foreign saving. Household consumption and consumption expenditure have raisedrnmore when investment on electriCity is financed by increased foreign savings.rnHowever, they have grown at negative rate when the investment is fidly financed withrnincreased domestic household and enterprise saving. In general, investment onrnelectricity fidly financed by foreign saving is resulted in lower growth rate of realrnGDP due to worsening of the net export and it is also expected to be repaid thatrnwould increase indebtedness of the counlly. On the other hand, meeting thisrninvestment with domestic household and enterprise saving will be difficult. So,rnfinancing investment on electricity partly by domestic household and enterprisernsaving and partly by foreign saving would be worthwhile.