Ethiopia expects higher spending, growth in next fiscal year

By Dawit Endeshaw

ADDIS ABABA (Reuters) – Ethiopia’s overall spending is expected to rise slightly and economic growth to accelerate in the next fiscal year starting in July, its finance minister said on Thursday.

Ahmed Shide said in a budget speech to be presented to parliament that overall spending would rise to 801.65 billion birr ($14.7 billion) in the 2023/24 year, from 786.61 billion birr in 2022/23.

Ethiopia’s fiscal year runs from July 8 to July 7.

The impacts of the COVID-19 pandemic, a two-year war in the northern Tigray region and droughts, floods and locust invasions in parts of the country are still being felt by the Ethiopian economy, which has also experienced foreign-currency shortages.

Ahmed said the economy was forecast to grow 7.9% in 2023/24 from an estimated 7.5% in 2022/23.

“In the next couple of years, the economy will be free from (this) chaos and will be fully healthy,” Ahmed said.

The East African country’s budget deficit is expected to be 281.05 billion birr in the coming year. A 2022/23 deficit of 231.4 billion birr was projected at last year’s budget speech.

Ethiopia plans to cover the deficit by getting about 39 billion birr from foreign loans and 242 billion birr in domestic borrowing, Ahmed added.

Ethiopia requested in early 2021 a debt rework under the Group of 20’s Common Framework, an initiative for restructuring government debt aimed at low-income countries. Progress was complicated by the war in Tigray.

“Even though we were hoping that the G20 framework opportunity would bring meaningful change on debt treatment, it wasn’t quickly implemented and it remains to be our next homework,” Ahmed said.

In April, four sources told Reuters that Ethiopia was in talks with the International Monetary Fund (IMF) to borrow at least $2 billion under a reform programme.

($1 = 54.3861 birr)

(Reporting by Dawit Endeshaw; Writing by George Obulutsa and Bhargav Acharya; Editing by Alexander Winning)