Ministry Eyes Trust Fund to Reverse Education Finance Decline

Jan 24 , 2026. By SURAFEL MULUGETA ( FORTUNE STAFF WRITER )

The Ministry of Education is launching a new national trust fund in response to falling aid, runaway inflation, and shrinking household spending. According to federal educational officials, the initiative seeks to collect contributions from state-owned enterprises, a dedicated education tax, and profit allocations from major public investments. The goal is not to replace the existing education budget but to reinforce it, especially as the country faces some of the region’s lowest per-student spending rates.

The education sector, battered by inflation, dwindling foreign aid, and declining public investment, may soon see a new financial lifeline.

Drafted by the Ministry of Education, a national Education Trust Fund aspires to mobilise domestic resources to supplement a shrinking budget and curb the erosion of education quality across the country. The Trust Fund would hope to collect contributions mainly from state-owned enterprises, a dedicated education tax, and profit allocations from major public investments, disclosed a strategy document produced by the Ministry of Education.

According to federal education officials, the Trust is not a substitute for the regular education budget but will reinforce it, seeking to reverse a steep drop in external aid and household spending that has left Ethiopia with some of the lowest per-student costs in Eastern and Southern Africa.

Nearly 90pc of recurring costs go to personnel, yet their value has declined 17pc over five years. Over 40pc of schools across the country still lack basic amenities such as electricity, water, and libraries, while dropout rates range between 15pc and 20pc, and a third of school-age children remain out of school, with rural, pastoralist, and conflict-affected areas hit hardest.

The plan proposes that companies such as Ethiopian Airlines Group and Ethio telecom would contribute up to two percent of their annual profits, with the Airlines posting over seven billion dollars in revenues in 2023/24, and Ethio telecom generating 560 million dollars. A one percent profit levy on top corporate taxpayers, which generated 300 billion Br in 2025, would also feed the Trust. Pension funds would allocate two percent of annual growth, while other sources would include government grants, diaspora and community donations, and corporate social responsibility spending.

The Trust Fund would operate independently, under the ministries of Education and Finance, and be overseen by a board comprising government officials, education experts, the private sector, and civil society. Authors of the Trust document foresee that funds would be pooled and allocated based on need, with an emphasis on disadvantaged regional states, low enrollment, and infrastructure gaps. Transparency measures such as public reports, independent audits, and digital tracking are planned.

“The strategy follows a fund implementation policy and is built on research carried out by the Ministry of Education," said Abrham Mengistu, an executive team leader at the Ministry of Education for project management, partnership and resource mobilisation. "It clearly shows the need for a sustainable education financing mechanism. The Ministry of Finance will collect funds after parliamentary approval.”

Education advocates welcome the plan.

Yohannes Benti (PhD), president of the Ethiopian Teachers’ Association, believes the Trust addresses long-standing concerns about how to finance improvements.

“The policy question was settled earlier, but the real challenge was how to put an education fund into practice," He told Fortune. "This strategy responds to that gap. Teacher training needs steady investment that current budgets cannot support."

Leaders of the Ethiopian Disabled Associations Federation, with 38 member groups, were unaware of the strategy but called it "a necessity." Only 19 schools exist for disabled students, and donors' cuts back on support have forced the Association to consider the closure of some of the schools.

“It's very important and comes at the right time,” said Abayneh Gujo, head director. “If these schools receive financial and other support, they can do much more for the students. This strategy is long overdue but crucial.”

Abayneh urged companies to see contributions as a social duty.

Ethiopia runs one of Africa’s largest school systems, with roughly 40,000 to 42,000 general-education schools in pre-primary, primary, middle and secondary education. Enrolment in general education jumped from about 7.1 million students in 2000 to approximately 27 million by 2022. Nearly one in three school-aged children remained out of school.

Pre-primary education reveals progress and inequality. Gross enrolment ratios in pre-primary range from more than 120pc in Addis Abeba and close to 90pc in Harari to below 15pc in Afar and under 10pc in Somali regional states. Nationally, most pre-primary children attend “O”-class programs attached to government primary schools, while formal kindergartens remain largely an urban phenomenon.

These structural pressures are colliding with a tightening fiscal envelope.

Of the federal budget for the fiscal year 2025/26, education receives 240 billion Br, below 10pc of total federal spending.

This decline is not new. Over the past five years, education spending has steadily lost relative weight. Around 2020/21, education absorbed roughly 24pc of national government expenditure and close to 4.5pc of GDP, exceeding the global "Education for All" benchmark of 20pc of public spending. By 2021/22, UNESCO data put education spending at 4.07pc of GDP and about 23pc of government expenditure. By 2022, the GDP share had slipped to 3.74pc, and the education share of total expenditure had recently fallen toward the low-20s.

Nominal budgets tell a misleadingly positive story. The national education budget increased from about 180.2 billion Br in 2022/23 to 200.4 billion Br in 2023/24, an increase of roughly 11pc. Yet, high inflation erased those gains, resulting in an estimated 14pc decline in real terms. A UNICEF review of the 2024/25 budget reported an 18.8pc nominal increase but only a 1.3pc real rise, noting that real education spending has fallen by roughly one-third since 2020/21.

Part of the shift is seen in changing budget architecture. A growing share of education financing is now channelled through regional budgets rather than the federal Ministry of Education. In 2023/24, regional states accounted for about 72pc of total education spending, up from 64pc a year earlier. While this supports decentralised delivery of general education, it also means the federal education line appears smaller even as the overall system needs expand.

The consequences are visible on the ground. High pupil-teacher and pupil-classroom ratios persist in many regional states, uncovering shortages of classrooms and trained teachers. Recurrent spending, dominated by salaries, leaves limited room for textbooks, learning materials and school feeding programs. Pastoralist and sparsely populated regions face higher per-student costs that are not fully offset by formula-based transfers, widening equity gaps.

Conflict-affected areas, particularly in the north, require large sums for school rehabilitation, replacement of materials and psychosocial support, costs that lie largely outside the regular budget envelope.

Policy ambitions continue to outpace resources. Ethiopia’s current education sector plan targets universal pre-primary access, improved completion rates and expanded secondary enrolment, but official statistics show many indicators remain below target. With education spending now drifting below the international benchmark of four to six percent of GDP, budget briefs and sector reviews converge on a blunt assessment.

Education experts warn that without reversing the decline in real spending or mobilising additional domestic and external financing, the school system will struggle to meet its own goals, even as millions of children remain out of the classroom.

Alemayehu Teklemaryam (Prof.) of Addis Abeba University’s Inclusive Education Department cited severe funding shortages for teacher training, salaries, labs, and libraries. He noted South Korea’s education tax on all citizens as a model and argued that companies and individuals should contribute based on their earning capacity.

“Education is not just an investment; it pays back in the future,” he said.

He insisted on the importance of proper management and timely action.

“Everyone contributing to this fund is fulfilling their social responsibility," he said. "This strategy is very important and needs to be implemented without delay.”

PUBLISHED ON Jan 24,2026 [ VOL 26 , NO 1343]