Ethiopia, which the International Monetary Fund (IMF) says has the fastest-growing economy in Africa, needs to refinance maturing debt, fund infrastructure projects as well as pay wages and boost foreign-currency reserves.
Sunday 16, June 2019
(Bloomberg) --Ethiopia plans to increase 2019-20 spending by 1.6 per cent to fund projects that will help boost the Horn of Africa country’s economic expansion.
Ahmed Shide, the Ethiopian Finance Minister said that spending plans for the year starting July will expand to ETB 386.9 billion ($13.4 billion), adding that the budget will probably help the economy grow by nine per cent.
The IMF in December estimated the country’s public debt would be 57.2 per cent of gross domestic product in the fiscal year to 7 July and forecast the current-account deficit at 6.2 per cent of GDP.
The government will spend ETB 130.7 billion on capital projects including power plants and roads, ETB 109.5 billion on recurrent expenditure and ETB 140.8 billion will go to regional authorities.
Most of the capital spending will go to completion of already existing projects and only a few new additional projects,” said Shide.
The government’s target is to raise ETB 289.8 billion, or about 75 per cent of total planned expenditure, from tax collections and other revenue sources to fund the budget. It plans to plug the gap with domestic loans of ETB 56.8 billion and raise ETB 40.3 billion from foreign project financing.
Ethiopia acknowledges the challenge of meeting the tax target and will focus on increasing collections in the next fiscal year. In the first 10 months of the year ending 7 July, authorities got less than half of the ETB 211 billion they set out to collect for the entire period, added Shide.
Shide said that the country’s imports will increase by 11 per cent and boost tax revenue, that will however put pressure on the birr and could lead it to depreciate by as much as six per cent to 29.74 against the dollar.