Addis Ababa Goes It Alone with Record Budget

Jul 13 , 2025. By BEZAWIT HULUAGER ( FORTUNE STAFF WRITER )

Addis Abeba has approved a record 350 billion Br budget for the 2025/26 fiscal year, the first in the capital's history to run entirely without federal transfers.

Marking a 45.1pc increase over the previous year, the plan signals a bold departure from dependence on central government subsidies, embracing an ambitious, self-financed growth agenda that depends on aggressive revenue mobilisation, urban expansion, and infrastructure-led development.

"This is a turning point," Deputy Mayor & Finance Bureau head Abdulkadir Redwan told council members as he unveiled the budget.

However, questions persist over the feasibility of its lofty targets amid soft job creation, modest innovation spending, and simmering concerns about fiscal transparency.

The plan calls for an ambitious 117pc rise in revenue collection, pulling in 343 billion Br. Tax receipts are expected to account for 238 billion Br of that sum, a 58pc jump from the prior year, while municipal revenues should climb 78.4pc to 54.4 billion Br.

Non-tax revenue lines, including fees and service charges, are projected at 46 billion Br, a modest five percent increase, while the road fund remains flat at 1.84 billion Br. Foreign assistance will feature merely as a minor supplement at 6.8 billion Br.

These figures rest on last year's performance, when the city garnered 233 billion Br, 96.5pc of its target, and outperformed itself by 45pc year-on-year.

In contrast to previous budgets, which split funds evenly between capital and operational expenditures, this year's plan shifts more than 70pc toward long-term investments.

Under the new budget, capital projects will soak up 71.4pc of the total, leaving 100.1 billion Br (28.6pc) for recurrent costs. Of the capital allocation, 177.2 billion Br is earmarked for initiatives to support low-income residents, such as infrastructure upgrades, social-welfare programs, and market-stabilisation measures.

Council members greeted the subsidy-free approach with mixed reactions. Proponents hailed the move as a milestone in municipal governance, while sceptics questioned the feasibility of meeting aggressive growth targets.

Abdulkadir directed attention to the Finance Bureau's forecast of more than 21.5pc economic growth over the next three years, underpinned by overhauled tax-collection practices, expanded digital systems, and new job-creation schemes.

Samuel Kifle (PhD), acting dean of Addis Abeba University, noted that the city's budget was once the budget of the federal government. The budget had ballooned from 61 billion Br in fiscal 2021 to 230 billion Br in 2024, a 277pc increase in only three years. He voiced reservations about off-budget spending and raised alarms over subordinate institutions seeking foreign loans.

"Are we allowing them to get loans from foreign entities?" he wondered, warning that unchecked borrowing could strain the city's balance sheet.

He also cautioned against a mismatch between rhetoric and reality. Despite lofty pledges to modernise through innovation, only 4.9 billion Br was allocated to such initiatives.

Deberesina Musse, another council member, zeroed in on employment, arguing that the 60 million Br set aside for job-creation programs was woefully inadequate.

"The issue is intensely demanding," she said, chastising the administration of Mayor Adanech Abiebie for underfunding labour initiatives at a time of rising urban unemployment.

Deputy Mayor Abdulkadir defended the allocations, reminding critics that while the city administration could not fulfil every budget request, individual bureaus retained the authority to secure external funding, subject to cabinet approval. He disclosed that total expenditures had climbed by 95 billion Br from the previous year and that supplemental budgets could be ratified retroactively if the need arose.

On digital innovation, Abdulkadir advised caution. Rather than launching new platforms, he said, the city should first bolster existing systems internally. Newly established institutions received seed funding upon ratification of their mandates on July 12, whereas merged entities will have their budgets determined at midyear.

The shift toward municipal self-reliance comes as Addis Abeba's revenue base climbs steadily. The city's take grew from 56 billion Br in 2020/21 to 145 billion Br in 2023/24, more than doubling over three fiscal cycles.

Cabinet discussions touched on the risks of overdependence on municipal levies and the need to diversify income through measures such as property taxes and user fees.

Experts  suggested exploring municipal bonds and listing on the nascent capital market to fund large-scale projects without burdening taxpayers.

According to Mered Fikire-Yohannes, CEO of Pragma Capital and finance and investment advisor, to sustain development without federal backing, the city would have to pay higher interest rates than the federal government. He also cautioned that credit remains tight at the institutional level due to unresolved Eurobond obligations at the national level.

He believes a simplified tax regime and improved compliance mechanisms could help broaden the revenue base.

The budget resolution coincided with the launch of a package of administrative reforms designed to strengthen revenue generation and service delivery. Weekend market centres have expanded from 193 to 219 sites, and direct supply channels for agricultural and industrial goods now serve more than 300,000Qtls of sugar and 4.3 million liters of edible oil to urban consumers.

The city has invested over 14 billion Br in public-transport subsidies, medical supplies, bread-distribution programs, and emergency feeding initiatives. Partnerships with private bakers have yielded 26 new bread factories, including Sheger Bread and Birhan Bread, benefiting 36,000 residents across 26 locations.

Road projects have remained a centrepiece of Addis Abeba's capital plan.

Over the past year, the city laid 371Km of new asphalt roads, 95.2Km of cobblestone pavements, and 16.1Km of gravel pathways. Pedestrian infrastructure received 107Km of sidewalks, and 3.7Kms of retaining walls and drainage channels were installed to mitigate flooding. A further 1,180Km of existing roads were rehabilitated and reopened.

The ambitious Corridor Development Project, financed with 6.1 billion Br, upgraded 170Kmof major thoroughfares in two phases, causing the resettlement of residents across 100hct of land. The city constructed more than 4,000 homes to house displaced families while improving arterial roads, pedestrian zones, and stormwater systems.

City officials reported that housing development registered 55,729 new units last year. Individual developers built 11,260 homes; real-estate firms delivered 30,507 units; community initiatives added 8,786; and government programs accounted for 5,176 dwellings.

The city also reclaimed and redistributed 665 existing housing units, including 453 former government residences and 212 communal homes.

Despite these efforts, Addis Abeba faces a housing gap of nearly 1.2 million units. National targets call for 486,000 homes annually, yet annual completions average at 165,000 units. Over the past decade, private builders have added only 21,000 houses, while the government's condominium scheme has registered over one million dwellings but handed over 384,000.

As the council wrapped up its session, it did so in uncharacteristic harmony, passing the full budget bill without dissent.

PUBLISHED ON Jul 13,2025 [ VOL 26 , NO 1315]