The federal government is imposing a new tax, hoping to generate an additional 22 billion Br this year.

Dubbed “social welfare levy”, the tax will apply to importers, who will pay three percent on the items they bring into the country, barring a few exemptions. Imported goods subject to surtaxes, including fertilisers, petroleum products, mass transport vehicles, and capital goods, are exempt. Tax officials will have to calculate the new levy after adding up the value of the imported goods, freight costs, and insurance fees.

Officials say the revenues will go towards reconstructing facilities damaged by the conflict in the north, instability in other parts of the country, and gaps brought on by the COVID-19 pandemic. Rising public expenditures have battered Ethiopia’s economy due to civil war, political instability, pandemic and ballooning global commodity prices. Surging budget deficits have led federal authorities to search for unprecedented financing, including property and fuel excise taxes.

The latest edict in social welfare tax is one more addition.

“The private sector should play its part,” said Habtamu Mengesha, director of legal affairs at the Ministry of Revenues.

Public infrastructure such as health centres and schools across the country have sustained damage from the militarised conflict. Close to 1,800 health centres in four regional states, including Afar and Oromia, have been partly or wholly damaged, disclosed Tadesse Yemane, director of infrastructure development at the Ministry of Health.

Health officials estimate the reconstruction work will demand 20 billion Br, although the spending could grow as health centres are still at risk in some areas. According to Tadesse, the Ministry submitted a proposal for additional financing to cover the costs last May.

In Addis Abeba, Zewditu Memorial Hospital is one of the health facilities having overstretched resources to the pandemic. It is the largest antiretroviral treatment centre, attending to 14,000 patients each month. Demand for drugs is up nearly fivefold due to the complications from COVID-19, said Hanna Lekata, director of pharmacy.

The upsurge in use of gloves and other personal protective equipment is part of the burden. Before the pandemic, the Hospital used 7,000 pairs of surgical gloves a year. It has since grown to 28,000.

Last year, the federal government apportioned the Hospital 39 million Br to cover pharmaceutical and equipment procurement costs, short 32 million Br from what Zewditu’s administrators had requested. This year, the budget approved is half the 80 million Br requested by the Hospital.

“We need additional financing to cover the gap,” said Hanna.

It might be difficult for the Hospital to make ends meet, as federal officials are eager to slash expenditures this fiscal year. And they have a good reason to.

The government has been trying to cover the cost of reconstruction by reallocating funds from other budget items but has met with little success.

Despite this year’s federal budget exceeding its predecessor by nearly 112 billion Br, financing the budget deficit of 308 billion Br is a daunting task awaiting Finance Minister Ahmed Shide and his deputies. Recurrent expenditures account for nearly 45pc of the 786.6 billion Br budget lawmakers approved this year.