The Ministry of Finance has drafted a bill that proposes 470 billion Br for next year's federal budget, a figure highly influenced by fears of the repercussions the Novel Coronavirus (COVID-19) could cause to the economy. The proposed budget is 83 billion Br higher than the current fiscal year's value.

In terms of foreign currency, the budget stands at 13.7 billion dollars, a slight increase from the current fiscal year's 13.4 billion dollars and a considerable increase from the 12.6 billion dollars that was ear marked two years ago.

The bill that is expected to be tabled to the Council of Ministers this week aims to cover a little over half of the budget from domestic tax revenues. Out of the total, 100 billion Br will also be raised through external loans. The remaining balance of expenditures is expected to be covered by other non-tax sources, including foreign grants and domestic investments.

The Ministry's proposed budget is 21.5pc higher than that of the current fiscal year and 35.5pc higher than the amount that was allocated two years ago. However, the growth rate also remained modest, considering the 52.3pc growth rate that was recorded 13 years ago, when the federal budget jumped to 45.7 billion Br.

Out of the total budget, 180 billion Br of it is allotted as subsidy appropriations to the regional states, higher by 40 billion Br from the current fiscal year's budget.

Next year is going to be a difficult one, according to Eyob Tekalign (PhD), state minister for Finance, pointing that the pandemic has already battered the economy.

"We needed to be more flexible," Eyob told Fortune.

To offset the challenges the economy is facing due to the pandemic, the parliament has approved 48.6 billion Br as the second supplementary budget of the year. The latest approval made the total extra budget of this year 76.5 billion Br. The supplemental budget will be directed to food support for 30 million people who are part of vulnerable groups and to procure additional medical equipment and medicine to combat the pandemic.

Two months back, the government approved a 27.9-billion-Br supplementary budget for the implementation of the Homegrown Economic Reform Agenda that was launched by the administration. The two additional budgets are on top of the 386.9 billion Br federal budget that was approved last July.

For the current fiscal year, the government intends to raise 253 billion Br from domestic revenue, of which 225 billion Br was expected to be generated from tax revenues. However, the pandemic, which was first reported in mid-March in the country, hit the economy hard and paralyzed almost all economic sectors and industries.

With decreased government income from tax and non-tax sources and increased government expenses, 11 billion Br is expected to be lost by the end of this fiscal year, according to Ahmed Shide, minister of Finance.

Since February there has been a significant drop in the collection of taxes. The tax revenues generated in February as compared to the same month in the last fiscal year shows a decline of 14.8pc. The government is expecting the growth rate of the country's GDP to fall by two to three percentage points from what was expected.

To address the adverse effects of the pandemic on fiscal policy, the country needed 64 billion Br. Out of that sum, 15 billion Br was raised by restructuring the budget of this year from different government offices.

To fill the remaining balance, the government intends to borrow 10 billion Br from the central bank, raise another 10 billion Br by selling treasury bills and bring in 28.6 billion Br from various grants and loan.