This paper attempts to analyze the salient feat ures of the new Ethiopian urban land lease holdingrnProclamation NO.72112011 and its implications on the Ethiopian economy. Today the new leasernholding proclamation has become a burning agendum of discussion throughout the country. Thisrnproclamation prohibits the allocation of urban land other than through lease holding and designsrna general direction through which all urban land holdings will in the future be converted to thernlease system. Moreover, it highly restricts transfer of use right on urban land, providesrnunreasonably short time for commencement and completion of constructions, stipulates strictrnmeasures for failing to commence and complete construction within the time and restricts thernright to appeal of aggrieved parties.rnIn order to identify the implications of the proclamation on the Ethiopian Economy, the writerrnhas consulted various literatures and collected information tlu'ough interviews and focus grouprndiscussions with different concerned bodies. Based on this it has been founded that the changesrnand restrictions introduced by the proclamation have a negative bearing on the transaction ofrnimmovables i.e. , land and buildings, security of tenure of urban residents, the constructionrnindustry, banking services, urban housing service, the market and investment. This in turnrnaffects money circulation, job opportunity and the income of both individuals and therngovernment which has a negative influence on the country's economy.rnThe paper also attempts to show that there is no provision under the FORE constitution whichrnprovides that all urban residents will be allocated urban land through the lease system. It is alsornindicated that the lease system designed by the proclamation which in principle allows landrnallocation based on tender does not take in to account the capacity of most urban residents andrnthus such residents as they are also joint owners of the land should be allowed a plot of landrnbased on the permit system at least for residential purposes.rnMoreuvcr, it is stated that the govenunent should not impose any restriction on transfer ofrnproperties .attached with the land as long as individuals pay the required transfer tax and relatedrncharges. It is argued that the period of payment of lease, commencement and completion ofrnconstruction should take in to consideration the prevailing realities on the ground. It is alsornrecommended that the government should pay compensation at market price for the propeliiesrnattached with the land and the permanent improvements on the land to the lessee when thern< contract of lease can't be renewed because of the fact that the appropriate body refh sed to renewrnthe lease contract when the land is needed for public interest. It is also stated that aggrievedrnpArties should be entitled to take their appeal on all issues to the regular courts regarding urbanrnland clearance. It has also been indicated that rather than trying to amend the proclamationrnthrough a regulation the government should amend the proclamation itse lf as a regulation whichrnis enacted to implement the proclamation cannot legally amend the same