Universities Win Autonomy Only to Find the Purse Strings Tightened

Universities Win Autonomy Only to Find the Purse Strings Tightened

Apr 26 , 2026. By BEZAWIT HULUAGER ( FORTUNE STAFF WRITER )

The Ministry of Education is shifting the financial foundation of autonomous universities, moving from discretionary allocations to a formula-based block-grant system. State Minister Kora Tushune disclosed that the move shifts financial management responsibility directly to the institutions, promising more institutional room while tightening rules for auditing public funds. Six first-generation institutions, including the universities of Gondar and Hawassa, are to transition, which will push them to define clearer missions beyond the uniform model under which they were established.

The Ministry of Education (MoE) plans a new block-grant budget regulation for autonomous universities, replacing discretionary allocations with a formula-based system, its officials believe will make funding more transparent and tied to national development priorities.

The proposal follows complaints that budgets are insufficient and unstable, leaving managers unable to plan for teaching, research, and internships.

According to Kora Tushune, state minister for Education, the system allowed the Ministry of Finance (MoF) to release block budgets quickly, while financial management responsibility was shifted to universities through a block grant. The regulation is meant to alter that relationship.

“This is to change the university funding mechanism,” the State Minister told Fortune.

Public universities are moving toward autonomy as the Ministry rewrites their financing, promising more institutional room while tightening rules for allocating, using and auditing public funds.

The draft rests on seven principles, ranging from result orientation to equity and from inclusivity to accountability and adaptability. It divides support into general-purpose grants that would be unrestricted, giving universities discretion to cover services, survival needs and priorities. Restricted-purpose grants would be tied to infrastructure, teaching hospital operations, national priorities, and equity support for women, persons with disabilities and students from underdeveloped regional states.

Under the formula, general-purpose support would include a base grant that can cover up to 40pc of recurrent budgets for essential spending. The Budget Support Management Council, under the Ministry of Finance, would calculate it annually based on enrollment, ownership status, and geographic challenges. The rest would be determined by a formula that combines input, output, and equity indicators, with the formula reviewed every two years.

Restricted grants would be subject to tighter supervision, with a technical committee to verify needs before funds are released. Funding for teaching hospitals would be based on patient numbers, treatment complexity, and verified medical costs. The money would be disbursed quarterly through direct transfers from the Finance Ministry to the universities' accounts, with strict reporting obligations.

The design seeks to answer demands for autonomy without surrendering oversight. Officials expect it to improve allocations and strengthen competitiveness without eroding fairness. It also tells universities to generate internal revenue through community-sensitive fees while maintaining comparable standards. What remains unclear is how the Council will weigh enrollment, ownership, location, outputs and equity, and whether data systems can prevent new disputes over budget pressures.

A separate financing problem sits in research, internships and externships. These activities are central to practical learning and innovation, but stall because resources arrive late or not at all. The Ministry is exploring alternative financing for a steadier base.

“We're planning on pool funding,” Kora told Fortune.

The pooled model is expected to draw contributions from industries that host students during training placements. It is intended to strengthen links among education, research institutions, and the private sector. According to the State Minister, a new law governing linkages between higher education and TVET research with industries has been issued. Under this law, industries would pay a small, structured levy into a shared fund dedicated to partnerships among universities, TVET institutions, and companies. When lecturers and instructors are placed in factories or business settings to solve practical problems and address skills gaps, firms would channel modest contributions into a national pool fund.

“Since there are many industries, sufficient funding will be found,” Kora said. "Implementation is awaiting review by the Ministry of Finance."

The joint guideline covers universities, TVET institutions, and industries that host interns or run “teacher extension” programmes in which educators enter industrial settings.

Says Kora: "Funding should not constrain participating institutions because industries would contribute directly to the pool."

The arrangement, he argued, is not intended to treat internships and teacher placements as simple services. It is framed as a production and research collaboration generating value for both sides. Industries are expected to benefit from practical problem-solving, applied research, and skills development, while universities and TVET institutions could gain exposure to production. The unresolved issue is whether the levy has a defined rate, collection mechanism and enforcement procedure, details likely to determine whether the fund becomes reliable financing or another promise dependent on voluntary compliance.

Even as the Ministry seeks new funding mechanisms, procurement rules continue to weigh on universities. Officials say procurement laws remain unfavourable, creating operational constraints. Newly established universities alone spend close to 60 million Br a year on vehicle rentals, while all public universities together spend about 600 million Br. The Ministry has asked the Ministry of Finance to facilitate the procurement of more than 1,200 vehicles. The request has yet to be approved.

Six universities are expected to move to autonomous status soon. They are largely first-generation educational institutions, including the universities of Gondar, Hawassa, Haramaya and Arba Minch. They were established under a uniform model, with little emphasis on specialisation or diversification. Autonomy is expected to force them to define clearer missions and financing strategies.

The changes form part of a wider shake-up in higher education. In the private sector, reforms over the past two years have led to the closure of more than a hundred institutions. Others have shut down departments or restructured academic programmes to comply with new regulatory requirements. The standards reform is expected to extend to public universities soon.

Fitsum Gebremichael, assistant professor teaches educational planning and management at Hawassa University and has more than a decade of academic experience, including doctoral studies at Addis Abeba University. Over the years, he has seen how donor-led recommendations have shaped educational policies.

"As universities move toward autonomy, they will need strategies that meet global academic and research markets," he told Fortune.

He cited Harvard and Stanford universities as examples of institutions that use revolving funds to finance research and innovation. Fitsum foresees that some of the incoming autonomous universities may evolve into research-specialised institutions, requiring substantial spending on research infrastructure and funding.

Fitsum urged researchers to seek grants and earn income by producing policy briefs and applied research outputs that address national financing and development challenges. But he warned that deeper problems remain in bureaucracy, institutional structure and efficiency.

"Stronger follow-up mechanisms, especially around accreditation and audit reports, will be needed if autonomy is to improve accountability rather than merely shift pressure from government to universities," he said.

PUBLISHED ON Apr 26,2026 [ VOL 27 , NO 1356]