Month: March 2025

A new directive is beginning to shake up the tax regime with tougher penalties for non-compliance. Federal tax authorities are claiming to fight under-reporting and boost revenue collections. Under Aynalem Nigusse, minister of Revenues, they have revised penal rules for tax obligations hoping to enhance predictability and streamline tax administration.

Under the directive, administrative penalties are stricter, and penalty waivers are determined by whether taxpayers make timely and full payments of taxes, interest, and any non-waivable penalties. The revised rules also slash penalty waivers by 10 percentage points for unpaid or undeclared dues. Tax officials say this step is crucial to discouraging tax evasion, which they believe has eroded government revenue for far too long.

“Our tax collection has been undermined,” said Birrara Litgeb, the Ministry’s tax debt administration director.

He blamed historically low penalties that failed to encourage full compliance, contributing to the growth of under-reported and unpaid taxes over the years.

The federal government collected about 547 billion Br in tax revenue in the seven months of the current budget year, while interests and penalties amounted to 51.9 billion Br. Officials believe these penalties are critical for reinforcing compliance and driving revenue. The Ministry is working toward a combined federal and regional government target of 1.5 trillion Br in domestic taxes for the current fiscal year, putting its enforcers under pressure to crack down on overdue payments.

The directive escalates penalties for undeclared taxes from low to high, putting medium-level penalties on unpaid assessments. New provisions have also been introduced, building on changes to tax administration, excise, and VAT proclamations over the past five years. Departments that handle penalty waivers now have more explicit roles, and penalties are separated into low, medium, and high categories according to how severely they affect tax administration.

If taxpayers settle amounts due within 30 days of receiving a notice — whether from the tax review department, tax appeal commission, or court rulings — penalties can be reduced by up to 90pc for low-level, 80pc for medium-level, and 70pc for high-level. It represents 10 percentage points lower than the reductions available under the previous directive. For payments made between 31 and 60 days, waivers drop to 80pc, 70pc, and 60pc for low, medium, and high, respectively. Those made after 60 days only qualify for 70pc, 60pc, and 50pc waivers. If property has been seized because of tax arrears, those who pay before an auction notice is issued may see waivers of 60pc for low-level penalties, 50pc for medium-level, and 40pc for high-level.

These rules only address administrative penalties and do not cover interest on tax arrears unless a miscalculation derives from an administrative error. Once verified, branch managers are mandated to correct the interest.

Federal tax authorities hope that the new system encourages a more transparent and efficient tax environment at a time when many businesses complain of aggressive enforcement and complicated rules. They believe up to 90pc of a penalty may be waived, depending on how many subordination incidents an administrator finds. Complete waivers can be granted in cases of force majeure, such as natural disasters or serious illness, court-certified business bankruptcies, voluntary disclosure of tax errors before findings by authorities, and substantial property loss from verified disasters.

Low-level penalties may be waived entirely if taxpayers pay taxes, interest, and non-waivable penalties within 30 days of receiving a tax assessment or legal notice.

Despite these changes, many businesses argue that the government’s approach is too heavy-handed, accusing officials of layering bureaucracy and unpredictability onto an already challenging environment. Recent efforts to raise Ethiopia’s tax-to-GDP ratio by 0.5pc centre on VAT collections, which are part of a broader reform agenda advocated by the International Monetary Fund (IMF). In July last year, Ethiopian authorities agreed with the IMF to increase the ratio by four percentage points by 2027/28, using various tax reforms, including VAT.

Over the past four months, confusion has emerged as tax authorities have demanded back taxes, interest, and penalties from banks. Commercial banks say the new VAT law, ratified in July, caused a flurry of retroactive assessments for the prior seven months. The Revenue Ministry wants banks to comply retroactively from the effective date of the proclamation, which has triggered penalties and interest charges for undeclared taxes.

Bank executives claim having to pay steep sums even as they struggle to recoup uncollected VAT from customers.

“Banks are struggling with unfair tax requirements,” said Demssw Kassah, secretary general of the Ethiopian Bankers’ Association.

The Association has repeatedly pleaded with the ministries of Revenue and Finance for waivers or new rules. He says these calls have gone largely unanswered, leaving potential liabilities in the billions of Birr. The banking industry has also requested written guidelines for district tax offices to start collecting VAT on October 1, 2024, instead of the earlier date.

Sidama Bank, for instance, faces roughly six million Birr in unpaid interest and penalties. According to its President, Tadesse Hatiya, his bank has talked with tax officials about what he sees as an unfair levy.

“The bank has been affected by debts from interest and penalties,” Tadesse told Fortune. “It’s not communicated to us officially.”

Gedda Bank’s President, Wolde Bulto, is wrestling with similar issues. He worries that recovering uncollected VAT from past transactions is nearly impossible, which puts banks under added pressure.

“The financial impact on banks cannot be understated,” he said, noting liquidity constraints and performance struggles.

His bank lost millions of Birr in revenue to penalties and interest.

“We had no choice but to pay,” he said.

Officials at the Ministry of Revenues hold a different view.

Its Legal Director, Abere Asfaw, insisted ignorance is no excuse under the law, and that once legislation is ratified by Parliament, it takes effect immediately unless changed.

“There’ll be no compromises,” he told Fortune.

However, the directive does allow the Ministry and the Addis Abeba and Dire Dawa Revenue bureaus to grant total or partial waivers for extreme economic, administrative, and social hardship.

There are more than 50,000 taxpayers in Dire Dawa city. Its Revenue Bureau Head, Abdussalam Mohammed, claims some are unwilling to meet their tax obligations. Yet, he has seen improved awareness and compliance in recent years. The new directive, he believes, could further clarify tax procedures and improve communication between businesses and tax authorities.

“It’ll encourage more taxpayers to approach the Bureau proactively before punitive measures become necessary,” said Abdussalam.

In Addis Abeba, home to over 450,000 taxpayers, the Revenue Bureau continues to deal with alleged under-reporting, evasion, and a drop in willingness to pay. In the past seven months, it collected 98 billion Br, including interest and penalties.

“There is less compliance among medium taxpayers,” said Communications Director Sewnet Abate.

A recent study found that 64pc of about 123,000 Category A and B taxpayers either fail to pay payroll tax or under-report it. It also discovered that 44pc of employees at private limited companies were listed as not paying payroll taxes at all. The Bureau conducted price evaluations on more than 2,000 goods to set payment standards and limit under-reporting.

Sewnet believes stronger measures are needed to fight under-reporting.

The broader investment climate is also at stake. Last year, a European business lobby in Ethiopia released a policy briefing criticising the tax system for its “lack of transparency, unpredictability, and bureaucracy,” which drives some investors away. Leaders of the European Chamber of Commerce in Ethiopia, representing 180 companies, blamed “unclear powers” for tax auditors and an appeal process that requires a 50pc upfront payment. The group warned that inconsistent tax laws and directives create frustration, discourage investment, and impede growth.

For tax expert and scholar Tadesse Lencho (PhD), while penalties serve as a deterrent, the self-assessment tax system could be better aligned with punishment levels.

“Penalties are about deterrence,” he said.

According to Tadesse, a lack of consistent enforcement still weakens the tax administration. He pointed out that Ethiopia’s tax-to-GDP ratio dropped from 13.2pc to below 10pc over the past decade, citing rampant contraband trade, poor collection mechanisms in rural areas, and corruption.

“The factors are numerous,” he said. “Officials should address multiple shortcomings to reverse the trend.”

Tadesse also urged authorities to adopt clear oversight protocols and transparent enforcement to avoid unfair competition and the kind of evasion that undermines public trust.

“Oversights should be made clear and enforceable,” he said, arguing that efficiency and consistent application of penalties are as important as the penalties themselves.

Such reforms, he added, could help rebuild confidence in a system many view as overly complicated.

Traditional coffee vendors in Mesalemia neighbourhoods embody a dilemma now playing out across the capital. Within a week, bean costs soared by 100 Br from 650 Br, forcing them to charge 25 Br a cup, an unwelcome hike for consumers. Daily sales have dwindled from three litres of coffee to two for some vendors, leaving stalls a shadow of their former self. The once-steady business of selling coffee is becoming increasingly unsustainable. The crisis resounds through Addis Abeba’s sprawling markets, most notably Mercato, where coffee prices have shot up by as much as 20pc in a week. Low-grade coffee that recently cost 125 Br a kilo has now rocketed to 230 Br, while higher-grade beans have climbed to 1,100 Br, a 57pc jump in three months. Vendors across the city say curious customers still approach them but rarely buy in the quantities of old. Ethiopia’s large portion of coffee, which has an annual per capita consumption of 2.3Kg, is consumed domestically, a factor that makes this surge especially wrenching for household budgets.

Tomoca Coffee, a near-legendary brand founded in 1953, is experiencing its price battle. The cost for 17Kg of coffee jumped from 3,000 Br to 11,000 Br within months, yet Tomoca has stood firm on its 95 Br cup price, despite absorbing a considerable financial hit. It has instead raised the price of its roasted and ground coffee by 20pc, now 2,560 Br a kilo, and turned to diversification, offering honey, black seed oil, leather goods, and more, to fortify its bottom line. Rising costs for fuel, shop rents, and wages for a workforce of over 2,500 people complicate any hope of breaking even on coffee alone.

Local bean supplies often pass through the Ethiopian Commodity Exchange (ECX). A recent policy change by the Addis Abeba Revenues Bureau has also played a part, replacing bulk reporting with a detailed, market-based Value Added Tax (VAT) system. The Bureau has already collected 113 billion Br of its 230 billion Br target, emboldened by the power to impose VAT on market-derived prices when discrepancies arise in reported sales. Businesses worry that such regulatory pressure, combined with already steep costs, leaves them little flexibility.

Many officials see the shortage as partly seasonal, with February and March heralding a supply gap between old and new harvests. They also point to diminishing contraband and lucrative export markets that draw top-quality beans away from local stalls. Ethiopia, which produced 833,000tns of coffee last year, plans to export nearly half a million tonnes this year and has already shipped 223 million tonnes in seven months, raking in over a billion dollars. A new digital tracking system is punishing companies found withholding stock or veering from warehouses, tightening the supply for domestic buyers. Farm-level realities pile on. Some regions face unexpected rainfall or labour shortages that halve production, while union-led export drives prioritise profit abroad, leaving local markets with higher price tags. Experts urge policymakers to ensure a stable domestic supply, warning that vendors with neither the capital nor the bargaining power to steer these global shifts could be priced out of the beloved coffee tradition altogether.

In an unambiguous policy shift, the federal government has granted operational licenses to three companies, marking a decisive move toward liberalising the country’s logistics sector. It marks a departure from earlier restrictions that limited foreign ownership in joint ventures to 49pc, signalling a more open approach to promoting competition in the sector.

Dismantling the long-entrenched monopoly held by the state-owned Ethiopian Shipping & Logistics Services (ESLS), federal authorities have granted permits to the Ethio-Djibouti Railway S.C., Ethio-Railway Logistics Plc, and Gulf Ingot FZC Multimodal Operator. Their operations are set to commence within six months.

Senior federal government officials, including Minister of Transport & Logistics Alemu Sime (PhD) and Ethiopian Maritime Authority(EMA) Director General Abdulber Shemsu, issued the licenses last week at the Radisson Blu Hotel, on Marshal Tito Road.

“The companies have met stringent financial and technical criteria,” said Abdulber.

The issuance of the licenses comes amid growing concerns over the national logistics operation.

“Our logistics performance needs to improve in cost and time,” said Minister Alemu during the event. “Competition is crucial for that.”

The Minister’s statement reflected a broader recognition among policymakers that improving the efficiency of the logistics sector is essential for supporting the country’s economic growth.

Ethio-Djibouti Railway S.C. is positioned to be one of the early beneficiaries of the policy shift. A state-majority-owned company currently managing the 756Km railway line between Ethiopia and Djibouti, it is investing 300 million Br to transition from its traditional role into a full-fledged multimodal logistics operator. The company handles 14pc of Ethiopia’s import-export activities and has set ambitious goals to process 1.6 million tonnes of cargo in the next six months.

“We’re preparing the groundwork to enter shortly as a multimodal operator,” said Mintesinot Yohannes, director of Global Logistics at Ethio-Djibouti Railway S.C.

The company also faces issues such as lengthy clearance and documentation processes that have resulted in train delays of up to four days and extended container wait times at ports in Djibouti.

Ethio-Djibouti Railway S.C. also seeks to enhance transit times, cut costs, and boost annual revenues. The company recently secured a freight-forwarding license with a six-month revenue target of 23 million Br, outlining its strategy to diversify logistics investments and increase its market share in an increasingly competitive sector.

Ethio-Railway Logistics Plc represents another critical element of transport authorities’ plan to animate the logistics sector. A joint venture company between the Ethiopian Railway Corporation and GetAs International Plc, owned by Getu Gelet’s family, carries a paid-up capital of 350 million Br, with the state-owned corporation retaining a majority stake.

Samuel Getu, GetAs International’s chief operations officer (COO), stressed the business opportunity presented by the venture.

“We’re pursuing this for the business opportunity it presents,” he told Fortune.

GetAs International, a diversified conglomerate established in 1994, is well known for its involvement in import and export trade, construction, cement manufacturing, transport, farming, forex trade, and asset ownership. The latter includes a landmark property, Getu Commercial Centre, on Africa Avenue (Bole Road). Its long-standing presence in horticulture exports and robust transport arm, Getas Transport, which operates more than 200 trucks, positioned it to leverage its expertise in the logistics sector.

The third company to join the fray is Gulf Ingot FZC Multimodal Operator, a subsidiary of Dubai-based Gulf Ingot FZC Plc.

With a paid-up capital of half a billion Birr, Gulf Ingot is expanding its operations in the Horn of Africa market, having previously focused on unimodal dry-port transportation with a fleet of 160 vehicles. According to Yitbarek Zewde, board chairman of Gulf Ingot, the company’s plans are “extensive.” It intends to transition to full multimodal operations within six months, including investments in four ships and the pursuit of joint ventures with international shipping companies as well as partnership with Ethio-Djibouti Railway Corporation for railway transport.

For decades, the Ethiopian logistics market was dominated by ESLS, which managed roughly 90pc of the country’s cargo traffic. This monopoly had long been criticised for its inefficiencies and high costs. A recent study by the World Bank rated Ethiopia’s logistics performance at 2.94 out of five, citing major weaknesses in infrastructure (2.84), international shipment competitiveness (2.82), and time efficiency (2.89).

These deficiencies have been a source of concern for federal government officials and industry experts.

The Ethiopian Maritime Authority initiated the policy shift towards liberalisation, hoping to attract domestic and foreign investment to overhaul the sector. In recent years, the federal government has also issued licenses to companies such as Cosmos Multi-Modal, Tikur Abay, and Panafric Global, paving the way for broader participation in the logistics market.

Prime Minister Abiy Ahmed (PhD) has been vocal about reform. Citing the country’s poor logistics ranking — 126th out of 160 countries — he pointed out critical issues such as vessel inefficiency and exorbitant shipping costs.

The price for transporting a 20-foot container is 4,500 dollars, 429pc higher than in Vietnam.

The importance of these reforms is manifested by Ethiopia’s heavy reliance on Djibouti’s ports, which serve as the primary gateway for imports. Djibouti ports handle Ethiopia’s imports, which were valued at 17.9 billion dollars in 2023. Import volumes were very large. In the 2023/24 fiscal year, the country imported on the order of 19 million metric tons of goods. Export volumes were much smaller, roughly 1.2 million tons during the same period.

However, the performance of these ports has come under scrutiny. The World Bank’s Container Port Performance Index shows a drastic decline in Djibouti’s ranking from 26th to 379th, although Djiboutian authorities ferociously contested this rating.

Critics of the previous monopoly model have long argued that it led to inflated prices and inefficiencies.

Logistics veteran Kassahun Abberu (PhD), from Akakas Logistics Plc, was one such critic. He recalled that the multimodal sector’s monopoly created conditions that led to inefficiencies and increased export and import transportation costs.

“Nationalising the multimodal sector was a bad idea from the start,” he said. “While the current liberalisation is a step in the right direction, it should be fully implemented with relaxed financial criteria to allow more companies to enter the market and ultimately drive down costs and improve service.”

The call for a competitive logistics environment is echoed by private-sector voices, including Elay Trading Plc, an importer of laboratory and agricultural equipment. Its General Manager, Israel Taye, reckoned his company’s struggles with escalating shipping costs, noting that the price for a 40-ft container has risen to 6,800 dollars, forcing the company to pass on these costs to customers. He recalled delivery delays experienced under the incumbent system, with nearly half of the company’s orders arriving late, sometimes taking as long as two months instead of the expected 28 days.

“It’ll be beneficial to have more choices,” he said.

He is optimistic that introducing new operators will help reduce shipping times and costs while enhancing overall operational efficiency.

Local authorities in towns across the Amhara Regional State have begun enforcing newly revised tariff rates, seeking to generate revenue through municipal service fees. The regional government approved the regulation on December 18, 2024, which has begun in Bahir Dar, Dessie, and Gonder. Officials say the revenues will be used for infrastructure improvements and services that directly address local needs. In Bahir Dar, city administrators have drafted and approved a directive detailing how the revised taxes will be put into effect.

The regional state’s new regulation classified towns by type such as metropolitan city,  city administration, head and sub-municipality, and developing city. Each category will have its own set of tariffs. According to regional officials, transferring property titles or authenticating inheritance remains exempt from these charges, although standard service fees may apply.

The right to use leased properties is subject to tiered charges: three percent in metropolitan cities, 2.5pc in city administrations, and two percent in other types of towns.

According to local administrators, service fees are set to reflect the type and quality of services offered. Depending on the conditions in each town, fees can be charged at a fixed rate or as a percentage, guided by factors such as local demand for services and affordability. Annual sales for commercial and professional services will incur charges which have increased by 30pc to 60pc. Businesses will also see fees that have increased by 5pc to 20pc; and where fees are tied to specific locations, they may double, going from 10pc.

A new tariff covering emergency and fire services will range from 96 Br to 1,000 Br annually, depending on a commercial entity’s tax payment level.

According to regional officials, the regulation, designed to account for market conditions and economic stresses, is intended to address the budget gap often faced by the regional and local governments.

The Amhara Regional State has approved a 150.67 billion Br budget for the 2024/25 fiscal year, which regional officials hope will accelerate reconstruction and expand public services. The newly approved budget marked a 9.7pc increase from the 137.41 billion Br allocated last year. Regional lawmakers passed the budget in late July 2024, building on what had already been an unprecedented jump in spending during the previous fiscal year.

In 2023/24 alone, the budget leapt by roughly 42 billion Br compared with the previous year.

The regional state’s budget relies heavily on revenues generated from the region, which officials expected would cover about two-thirds of overall spending. Federal transfers, including a 46.9 billion Br block grant, round out much of the remainder, along with smaller external donations and special grants earmarked for Sustainable Development Goals (SDG) projects. Mid-year reports, however, painted a sobering picture. The region had collected only 25pc to 28pc of its targeted revenues, undercutting the budget’s ambitious assumptions.

“The regulation can effectively address the financial issues faced by cities considering current market conditions, inflation, and trade dynamics,” said Engdawork Gezahegn, tax affairs coordinator at the Amhara Regional State’s Revenue Bureau.

Engdawork disclosed newly included revenue sources, such as an entertainment tax and a 1.5pc hotel room service fee. Charges for waste management have seen an especially steep jump. Once between 100 Br and 400 Br a month, they are set to go as high as 5,000 Br.

“This can support those cities in preparing their annual budgets and finance infrastructure development,” Engdawork told Fortune. “Imposing tariffs will not adversely affect service providers.”

Previously, revenue collected by the regional state went into a broad mix of projects, whereas the revised system earmarks taxes more directly for the services that generated it.

“City administrations will now retain funds for core upgrades,” he said.

Among those feeling the changes in the tax regime is hotel operator Mohammed Bekele, a resident of Dessie town, whose establishment features 15 rooms, along with food and beverage services. Before the revised tax regime, he paid 400 Br each month for trash removal three times a week. Under the new plan, he expects to pay 4,000 Br for the same service. This year, he paid over 30,000 Br for development contribution and other municipal services.

“We’re being made to pay for numerous services now,” he told Fortune. The new rates, entertainment fees, and increased waste removal fees, on top of regular taxes, “lead us to wonder whether we can sustain our business.”

Mohammed remains concerned about low hotel occupancy. Security worries and inflation have led to fewer customers.

“Everyone advocates for paying for development, but the path to making and getting money is long,” he told Fortune. “We’ll be feeders.”

It is an expression conveying the strain his business is under.

The town’s authorities say they are poised to implement the regulation soon. They plan to draft local guidelines to meet the broader regional directive.

“Once the regulation is activated, we expect to see revenue increases that will improve infrastructure quality for our residents,” said Getu Bekele, revenue department coordinator of Dessie’s city administration. “We’ve big projects; this directive supports us to finish them and build new infrastructure.”

Dessie’s City Administration spent 673 million Br out of a planned 1.3 billion Br last fiscal year, to cover the town’s budget of 3.4 billion Br. Officials have collected 352 million Br by mid-year, mirroring last year’s plan.

In Bahir Dar, where the regional administration is headquartered, the city administration generates revenues through multiple channels, including taxes. However, certain provisions from older guidelines were seldom enforced. Fees for using bicycles and horse carts existed on paper but were rarely enforced.

“This regulation is revised considering current market conditions, pricing rates, and infrastructure development needs for cities and residents,” said Temesgen Andualem, a Revenue Bureau and Tax Education senior official. “Construction materials found on roads beyond their permitted time will now be subject to penalties.”

Regional authorities in Bahir Dar have issued a directive requiring timely payments. If fees are not met promptly, late penalties start at five percent for the first month and then two percent for each month thereafter, capped at the amount of the initial fee.

Recent property transactions in the region have also stirred local discussion.

A resident in Bahir Dar employed by a private company, Fentahun Tadeley, described how he paid four percent for an initial lease transfer and a land value when acquiring a property worth four million Birr.

“The government mandates various criteria for property transfers, such as proximity to roads and essential services,” he told Fortune.

The fee could run as high as five percent for a property sold. According to Engdawork, the new and old regulations have no other payment except for two percent, which relates to land tenure, and an additional two percent for stamp duties.

Revenue Bureau official Kefyalew Mulalem disclosed that officials in Gonder town have also moved to enforce the new regulations. According to him, the revised regulation includes two notable aspects: raised tariff rates and enforcing previously unused categories. Municipal authorities are looking to boost revenue from land auctions, construction permits, and essential service provisions, hoping to meet a 1.7 billion Br collection target this year.

“The intention is to ensure our city leverages resources comparably with others,” he said. “Some municipalities auctioned land for fees as high as half a billion Birr a square meter, while others only a fraction.”

Economist Atlaw Alemu (PhD) of Addis Ababa University viewed these moves as helping cities and towns generate their own revenue. However, he cautioned that it should be measured against real-world economic conditions. Atlaw stated local governments need peace and stability to enable construction, production, and other business activities crucial to sustaining the new revenue streams.

“It’s important to understand how much people can afford to pay during this condition and how many people are engaged in production,” said Atlaw, stressing the need to balance tax requirements with local economic realities.

Two years after the civil war left Tigray Regional State in ruins, a contentious effort to rebuild the region is now underway as municipal tariffs have been reintroduced to fund essential infrastructure and services. The Urban Development & Construction Bureau, which had remained silent on revenue collection for four years and was under the embattled Tigray Interim Regional Administration (TIRA), has now approved sweeping changes affecting more than 1,700 services.

According to regional officials, the new tariffs, including a 0.2pc levy on services provided to investors when obtaining loans and increased annual fees for industries and commercial properties, are critical for generating the revenue needed to restore roads, buildings, healthcare centres, and schools devastated by the war.

The decision, signed by Getachew Reda, TIRA’s chief administrator, comes amid growing pressure to revive the regional state’s ailing economy. Municipal authorities have relied heavily on federal block grants for years, but those funds have proved insufficient to repair the extensive infrastructural damage.

“Revenues are necessary for the economy,” said Sishay Kiros(PhD), an urban development specialist with the Bureau.

The revised tariffs mirror similar measures taken by regional officials in other regional states, such as Dire Dawa city as well as Amhara Regional State. TIRA aspires to raise roughly 10 billion Br during the current fiscal year, a target regional officials believe will provide the financial source for comprehensive urban renewal.

The new tariff regulations include an increased annual service fee for investors, which may reach as high as 300,000 Br, a threefold increase from previous rates. Commercial property fees have increased to 5,000 Br monthly. Municipalities will also enforce a penalty regime for delayed payments: an extra five percent penalty in the first month and two percent for every subsequent month. In some cases, authorities have even authorised property seizures to ensure compliance.

While the authorities’ intent appears to drive rapid revenue collection and fund rebuilding projects, these measures have sparked a fierce debate among business leaders. Many argue that the tariffs threaten to stifle recovery in an economy still reeling from war.

Business leaders in the region have raised concerns about the economic impact of these measures.

The Tigray Chamber of Commerce & Sectoral Associations (TCCSA) has repeatedly urged the administration to reconsider the new tariffs, especially for companies that have already suffered heavy losses. Its President, Berihu Haftu, contended that while Getachew, the TIRA chief, had announced a temporary pause on tariff implementation to ease the burden on recovering businesses, many municipalities continue to enforce the fees.

“Nothing has changed,” Berihu told Fortune, pointing to the disconnect between official proclamations and on-the-ground realities.

For many businesses, the additional costs threaten to derail efforts to restart operations, adding to an already overwhelming financial burden.

A businessman, who asked to remain anonymous due to the delicate affairs of the regional state, provided an illustration of difficulties local businesses face.

The plight of a water bottling company in Shire town that had been established six months before the onset of the war had initially secured a loan of 80 million Br. Due to accrued interest, the outstanding balance had swelled to 110 million Br. The company has struggled to obtain additional financing despite the desperate need for new capital, assessed at 180 million Br to procure machinery and cover working capital. In one recent incident, the business faced a demand for nearly one million Birr on a 30-million-Br loan, a burden compounded by the transport cost that charged six Birr for a 10Kg at every city the goods pass through.

“We need to rebuild before we are subjected to any payment requests,” the investor said, encapsulating the widespread sentiment among local entrepreneurs.

Local officials insisted that the revised tariffs are part of a broader strategy to revitalise the region’s shattered economy. Yet, as business owners recount their mounting struggles, a picture of deep-seated disarray emerges. An economic recovery plan, developed in the immediate aftermath of the war, has languished for two years, stymied by bureaucratic inertia and internal political disputes among senior members of the Tigray People’s Liberation Front (TPLF) and TIRA leaders.

“The economy of Tigray hasn’t recovered,” Chief Administrator Getachew lamented last week, addressing the media at the Sheraton Hotel “The state of Tigray has been neglected and needs help.”

His remarks amplified the region’s persistent turmoil, where erratic essential services, widespread infrastructural damage, and shuttered manufacturing units remain the norm.

The strained relationship between the local banking industry and the region’s business community is added to the economic despair. While banks in the region continue to attract large deposits, local entrepreneurs have found it increasingly difficult to secure new loans. As of June 2024, commercial banks in the region had issued nearly 1.5 trillion Br in loans and advances while maintaining a non-performing loan ratio of 3.6pc, comfortably below the regulatory threshold of five percent. Yet, despite these measures, local businesses remain deeply concerned about the long-term prospects for recovery.

The banks’ reluctance to extend more credit is seen as a major impediment to recovery. Although they have maintained low levels of non-performing loans, they are blamed for their risk-averse approach, which left many war-affected businesses starved for urgently needed capital. Some local investors have expressed frustration over the apparent disconnect between the availability of funds in the banking system and the limited access to those funds for businesses in Tigray.

“Despite banks collecting large deposits from Tigray, loans are being disbursed elsewhere,” Getachew criticised the financial institutions.

The failure to provide capital compounds the difficulties for businesses still struggling with the war’s aftermath. Temporary relief measures, such as a one-year loan repayment moratorium for a combined debt of 86 billion Br, have offered some respite. Yet, the relief is short-lived as interest continues to accrue, pushing many companies further into financial distress.

Regulators at the National Bank of Ethiopia (NBE) have intervened, extending grace periods and issuing a circular signed by Vice Governor Solomon Desta, urging banks to adopt more flexible repayment options. The Vice Governor, who asked banks to assess each borrower’s financial situation and submit recovery plans by March 31, 2025, sought to help war-affected businesses manage their overwhelming debts.

Amid this financial uncertainty, businesses have called for more targeted support. Representatives from the Tigray Chamber of Commerce have pressed for a write-off of accrued interest on loans, arguing that the current measures do not adequately address the extraordinary difficulties faced by companies whose assets were decimated during the war.

According to Haftay Hagos, the Chamber’s secretary general, business revival has been slow, if not entirely absent, and immediate intervention is necessary to prevent further economic decline.

Business owners, including Moges Negu, general manager of Moges Negu Commercial Ranch Plc, painted a grim picture of the challenges ahead. Moges, whose company suffered millions in damages during the war, had taken out a loan of 570 million Br six months before the outbreak of the war in November 2020. Due to accrued interest, the loan has since ballooned to nearly one billion Birr, and an additional request for a loan of 3.7 billion Br to restart operations remains unmet.

“I still haven’t been able to start operations,” he told Fortune.

Tigray Regional State’s economic anguish extends beyond the business community. The region’s infrastructure is in ruins, with intermittent electricity, disrupted healthcare services, and damaged public facilities, uncovering the scope of the crisis. The revised municipal tariffs, while sought to generate the funds for rebuilding, are seen by some as a double-edged sword. While they may represent a critical effort to mobilise local resources for infrastructure projects, critics see them further burdening an economy already teetering on the edge of collapse.

Kassahun Gebregziabher, deputy head of the Tigray Investment & Export Commission (TIEC), voiced his frustration over the slow pace of financial relief and the continued imposition of tariff-related charges.

“Nothing has changed,” he said bluntly, criticising the lack of meaningful support from the Ministry of Finance and other government agencies.

Internal political strife further complicated the situation. Getachew blamed last week senior military commanders within the Tigray Defence Forces (TDF) undermining TIRA’s authority, a situation he attributed to the influence of what he characterised as a “TPLF faction”, describing them as part of a “criminal enterprise.” These internal divisions have not only inhibited the implementation of the economic recovery plan but have also sown confusion among local businesses about the actual enforcement of the new tariffs.

While the administration claims that the Cabinet has approved the tariff measures, local officials report that municipalities are proceeding with collections, leaving many business owners unsure of what to expect in the coming months.

The business community remains deeply skeptical.

Economists such as Arega Shumete (PhD) have stressed the importance of security in boosting investor confidence.

“Investors operating in the aftermath of war require assurances that they will not revert to previous conditions of chaos,” said Arega. “Easing transaction costs and providing special access to credit would be crucial for a sustained recovery.”