The Budget Bill Asks the Most from Citizens with the Least Slack

.

---

When Parliament takes up the appropriation bill, federal legislators will receive a document that looks disciplined and speaks the language of reform.

However, within the 2.3 trillion Br federal budget proposed for next year, there is a line item marked "Others" with 904.6 billion Br behind it. A budget is supposed to make its priorities transparent and public. This one, at its most opaque point, hides them.

Tabled by Finance Minister Ahmed Shedie, the headline numbers at face value do not seem reckless. The net deficit has been squeezed to 1.4pc of GDP. Direct Central-Bank financing has been stopped. Tax mobilisation is rising, while donors are expected to help. Hopefully, after Ethiopia's 2023 default on its one-billion-dollar Eurobond, the federal government wants creditors and the International Monetary Fund (IMF) to see consolidation. On paper, much of the macro story responds to that demand and looks better.

The difficulty is that the budget is built for a calmer country than Ethiopia is today. It assumes a state at peace, with safe roads across the country, open markets, and a stable currency. But the economy is experiencing depreciation, imported inflation, rising debt, and multiple militarised conflicts all at once. The question is not whether the proposed budget's top line should be cut or raised, in as much as it is the money that should follow need, damage, and capacity rather than last year's spreadsheet.

On the surface, the budget structure shows some discipline. Recurrent spending takes 52.9pc of the total. Capital spending gets 568.3 billion Br (24.3pc) while subsidies for the regional states receive 520.6 billion Br. The Sustainable Development Goals (SDGs) window gets only 14 billion Br. Domestic revenue of 1.61 trillion Br covers 68.9pc of spending. Grants add 204.8 billion Br, but still leave a 522.7 billion Br gap, equal to 22.4pc of expenditure. That is to be financed by 329 billion Br in domestic borrowing and 193.7 billion Br in external loans.

But little money is truly movable. Debt service alone takes 542.1 billion Br (43.8pc) of recurrent spending. Fertiliser and fuel subsidies and capital for the Petroleum Supply Enterprise take 236.4 billion Br. Wages absorb 170.8 billion Br. Together, these three blocks account for about 77pc of recurrent spending and 41pc of the total federal budget. Debt service alone accounts for about 95pc of the entire capital programme. The state looks less like a service provider than a debt-clearing office with a payroll.

The recurrent budget then hides its choices. "Others" accounts for 73.2pc of recurrent costs, while federal social services receive only 126.4 billion Br (10.2pc) and economic services receive a mere 1.5pc. A category that large should not pass as routine accounting. Parliament cannot scrutinise what the executive does not break down.

The revenue plan adds another risk. Of the nearly 1.5 trillion Br tax target, 52.7pc is planned to come from taxes and duties on foreign trade. Customs duty is projected at 255.6 billion Br, and VAT on imported goods is 324.3 billion Br. The same depreciation that raises the Birr cost of fuel, fertiliser, medicines and construction materials also inflates customs receipts. Devaluation has become a revenue tool, although a regressive one, causing citizens to pay through higher prices, while the budget records the result as fiscal capacity.

Other numbers reveal a narrow base. Corporate profit tax is put at 263 billion Br, far above the 97.3 billion Br expected from wage and salary income. Passport and visa fees, at 36.5 billion Br, provide about a third of non-tax revenue. The government wants the tax-to-GDP ratio to grow from 6.2pc to 7.7pc and then toward 9.5pc. However, conflicts and blocked corridors make it hard to widen the base, putting the burden on compliant urban taxpayers already within reach of tax officers.

Capital spending has increased by 36.8pc compared to the end of the fiscal year, but the pattern is hard to defend. The Ethiopian Roads Administration (ERA) receives 121.8 billion Br, accounting for 21.4pc of all capital spending. The national health capital programme receives 91.8 billion Br. Agriculture, natural resources and food security together receive 61.1 billion Br. In a high-inflation and post-conflict economy, long-dated civil works still outrank urgent food-security and human-capital needs.

Some smaller lines will be politically louder than their size would suggest. The budget provides 7.6 billion Br for a national stadium, two billion Birr for Palace Administration, 300 million Br for a sound system in the Parliament and 300 million Br for "accessibility and image building". Against the total budget, these may seem small sums. In a year of food, fuel and tax stress, they cannot be small symbols.

A better answer need not change the total. Constitutional regional subsidies of 520.6 billion Br and debt service of 542.1 billion Br are fixed in the short term. The room lies in discretionary capital and softer recurrent costs.

New highway starts in stable areas could be frozen, cutting the roads envelope from 121.8 billion Br to 75 billion Br and releasing 46.8 billion Br. A rehabilitation fund for destroyed clinics, grid lines and municipal centres could grow from 10 billion Br to 55 billion Br. Federal office complexes could fall from 6.4 billion Br to 1.4 billion Br. Disarmament, demobilisation and reintegration could increase from one billion Birr to 10 billion Br. Contingency reserves could drop from 124.4 billion Br to 100.4 billion Br, while emergency disaster storage can grow from 1.7 billion Br to 23.9 billion Br.

Universities under the federal purview show the same problem. Capital for campuses in stable regions could take a 25pc stability haircut to a baseline near 850 million Br, with savings pooled for reconstruction. Wollo University, which records looted assets and structural damage, could receive 2.5 billion Br instead of the same flat 1.2 billion Br given to a campus that lost nothing. That would not breach the spending cap. It would only help the budget distinguish between damage and routine expansion.

None of these breaches the spending cap. The logic generalises beyond campuses and roads. A needs-based and conflict-adjusted formula asks each Birr to follow damage, displacement and absorption capacity rather than the previous year's spreadsheet. A clinic reduced to rubble in a recovery corridor has a stronger claim on capital than a second bypass road around a calm city. A region that lost its grid has a stronger claim than one that never went dark. The incremental model the budget now uses cannot capture these differences because it was built to replicate last year's lines with a uniform uplift.

Two further clauses deepen the credibility problem. The budget bill allows public bodies to record and spend additional loans or aid, in cash or in kind, and to report to the Finance Ministry only within a month of the year's close, a provision that quietly erodes Parliament's power to control spending before it happens. A second clause grosses up duties and taxes on goods that federal bodies import using grants or loans, inflating both revenue and expenditure without clarifying the actual transfer of resources. Add the universities that bury foreign teachers' salaries, a plainly recurrent cost, inside capital lines, and the classification itself begins to mislead. Capital looks growth-enhancing; recurrent looks rigid; and a budget that blurs the two flatters its own ambition.

The bill's authors could argue, perhaps correctly, that this is an IMF-compatible consolidation dressed up as a growth budget, and that the macro numbers are moving in the right direction. Growth is reported at near 10pc, inflation has fallen from 34.5pc to single digits (though it has reared its head lately), and reserves are rebuilding. But a budget is not only a macroeconomic instrument. It is also a social contract, and this one asks the most from the citizens with the least slack while spreading capital as if a map of the country showed no scars at all.

If growth, exports, customs receipts or donor disbursements disappoint, the adjustment will land on domestic borrowing, arrears, capital cuts or harsher enforcement. None is painless, and all grow likelier if the money was misallocated from the start.

---

PUBLISHED ON [ VOL , NO ]

---

[ratemypost]

---

[ssba-buttons]

Put your comments here

N.B: A submit button will appear once you fill out all the required fields.

Related Posts

Viewpoints | Jun 21,2025

Ethiopia's Scorecard Sets a New Standard for Inclusive Finance

Fortune News | Apr 10,2026

Ethiopian Airlines Pushes Mega-Airport Plan While Keeping Debt in Check

Commentaries | Oct 03,2024

Adolescents Face a Mental Health Crisis as Stigma, Neglect Prevail

Fortune News | Apr 22,2022

Bill Sees Meat Exporters Face Jail Terms for Certification Non-compliance

Radar | Nov 16,2024

Abyssinia Bank Strategic Moves Pay Off, Driving Profit Growth

Exclusive Interviews | Aug 03,2025

UNDP's Toughest Frontiers

In-Picture | Jun 29,2025

DRIED WEALTH

Fortune News | Feb 21,2026

BALLOTS LOOM YOUTH LOOK AWAY

Exclusive Interviews | Jan 07,2023

Offloading Climate Responsibility on the Victims of Climate Change

Election 2026 coverage | Jun 07,2026

Vote Counts Give Way to Complaints Over Credibility

---

---