Despite the government's aspiration of implementing a restrictive economic policy model, parliament approved this fiscal year's budget that shows an 11.5pc expansion from the previous fiscal year.

Prime Minister Abiy Ahmed (PhD) disclosed that his administration would be diverting from the previous economic policy approach that had been based on ‘aggregate demand’ to ‘aggregate supply.’

"For the past 15 years, we've been using 'big push' policy to drive the stagnated economy," he said last week at the parliament while defending a budget bill tabled by the Finance Ministry. "With this, lots of positive achievements were made based on aggregate demand."

In the 1970s and '80s, there was stagflation [a condition of slow economic growth and high unemployment accompanied by inflation] in the economy. This led to the implementation of developmental economic policy in the 1990s, where the government has been using expansionary monetary and fiscal policy to motivate the economy.

When EPRDF came to power, the total government budget was 4.9 billion Br. The value has shown close to an 8,000pc increase over the past 28 years, not adjusting for inflation, reaching 386.9 billion Br for the current fiscal year.

The aggregate demand approach is very common in most developing countries, according to Getachew Asfaw, an economist who has published a couple of books on the macroeconomic conditions of Ethiopia.

"However, it has created income inequality, caused higher inflationary pressure in the economy and macroeconomic imbalances," Getachew told Fortune.

In the context of this shift of economic policy approaches, this fiscal year’s federal budget allocated 130.7 billion Br for capital spending, 109.5 billion Br for recurrent expenditures and 140.7 billion Br for regional subsidies. The remaining six billion Birr will go to finance the Sustainable Development Goals (SDG).

This year's capital expenditure shows a 14.8pc increase from the past fiscal year, an increase of 16.4 billion Br. Recurrent spending will also see a 19.5pc spike, 7.9 billion Br in absolute figures. Subsidies for regional states saw a marginal increase of 3.8pc with 5.2 billion Br more allocated in the budget.

This year’s budget is 11.5pc higher than the just-ended fiscal year and 20.6pc higher than the budget of two years ago.

In terms of foreign currency, the budget stands at 13.4 billion dollars, a slight increase from last fiscal year's budget of 12.6 billion dollars. However, it is on par with the 13.3-billion-dollar budget of two years ago.

Given the double-digit inflation in the economy, the approved budget is not expansionary, according to Alemayehu Geda (Prof.), a macroeconomist and a university lecturer.

In allocating the budget, the government forecasts that the economy will grow by 9.2pc, based on the growth rate of the just-ended fiscal year.

However, Alemayehu is skeptical of the economic growth rate forecasted by the government.

"Considering the situation in the country, the growth rate could not exceed seven percent," he said. "The exaggerated forecast would have a negative impact on the target of tax revenue.

The government targets to cover 253 billion Br, or 65pc, of the budget from domestic tax revenues. Foreign aid, loans and domestic loans are expected to cover the balance. Foreign aid and loans are expected to cover 9.3pc and 10.3pc of the budget, respectively.

As of the beginning of July, the Ministry of Revenues collected 197.2 billion Br from domestic taxes out of the planned 235.7 billion Br in revenue, 83.7pc of the target.

Alemayehu argues that in targeting tax revenue collection, the government considers the forecasted economic growth, which is inflated in this case, making revenue forecasts wrong.