Austere Budget Passes Without a Hitch

Parliament unanimously passed the federal government’s budget for 2018/19 last Friday, July 6, 2018. Standing at 346.9 billion Br, it is five percent lower than the previous year’s budget in dollar terms. Over two-thirds of the budget is expected to be covered by tax revenues, and the balance from what state enterprises generate in profites, external grants and loans.

Prime Minister Abiy Ahmed (PhD) defended the budget – which Abraham Tekeste (PhD), minister of Finance & Economic Cooperation, tabled last month before parliament. Over 60pc of the MPs were in attendance, including Asmelash Woldeselassie, a government whip, and Muferihat Kamil, speaker of the House.

Abiy told legislators that new projects would not commence given low domestic revenues, foreign currency crunch and a debt pile up. He stressed that even finalising mega-projects that are still under construction will be challenging, as 7.5 billion dollars will be needed. Heavy borrowing by state enterprises reaching at 400 billion Br, corruption in the public sector and capital flight were singled out as the main threats to the economy.

The Prime Minister was adamant in calling out to private players and the Diaspora community to contribute their fair share to the economy. He offered clemency to individuals willing to deposit cash that has been hoarded overseas with Ethiopian banks, while threatened with harsh measures against those who fail to comply. A proposal was also made to the Diaspora community to chip in a dollar a day in a trust fund that the government will set up.

The fiscal year that came to a close yesterday has been rough on the nation’s macroeconomy, driven by a high trade imbalance and political unrest. It has led the Finance Ministry to issue a directive to limit federal agencies’ spending, the National Bank of Ethiopia (NBE) to devalue the Birr by 15pc against a basket of major currencies and the Ethiopian Revenues & Customs Authority (ERCA) to toughen up tax collection. But Abiy said the economy has expended by lower than 10pc in GDP.

Experts note that the coming fiscal year will not be merry either. They see the private sector is too battered by the macroeconomic crisis to cover 68pc of the federal government’s budget. And that the central bank will be complelled to finance the deficit, projected to reach 2.3pc of GDP, worsening inflation – which in the just-ended fiscal year was recorded to be at its highest in four years at an annual average of 13pc.

Published on Jul 07,2018 [ Vol 19 ,No 949]



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