I Recent

I: R t Trends
T d in
i Public
P bli Finance:
Fi Ethiopia
Ethi i

•A: Overall situation

 Ethiopia has a population of over 80 million,
 The country is a Federal State; consisting of the Federal
Government, 9 Regional Governments and 2 City
Administrations,
Administrations
 Agriculture is the main stay for 84 % of the population, (it
contribute 41.1% of GDP), Service (46.6%) and Industry
(13.4%),
 Strong
St economic i growthth has
h been
b witnessed
it d in
i recentt
years. Supported by improved agricultural production and
large-scale public investment in infrastructure, real GDP
growth has averaged 11.4 percent in the past eight years,
 Good
G d growth th performance
f has
h contributed
t ib t d to
t significant
i ifi t
poverty reduction and to good prospect for achieving the
MDGs,
 In recent years Fiscal policy focuses strengthening
d
domestic
ti revenue mobilization
bili ti and d increase
i pro – poor
spending,
2 Ethiopia: MoFED
 R
Recent
tTTrends
d in
i Public
P bli Finance:
Fi cont’d
t’d

 B: Revenue and Grant Performance

 In the past four year tax revenue has raised on average 36%
 In 2006/07 tax revenue was 10.1% of GDP,, it has dropped pp to
8.6% (2008/09), but it picked up to 11.5 in 2010/11 fiscal year,
 Generally grant performance is going down, however
Protection of Basic Sectors ((PBS)) is better,, due to the global
g
economic crisis,
 The economic performance and the tax policy reform effort in
the ppast ten yyears,, which was supported
pp by
y IMF and the recent
tax administration effort are a key to the recent tax revenue
performance,

3 Ethiopia: MoFED
 Recent Trends in Public Finance: cont’d

Table 1: General Revenue and Grant Outturn, 2006/07-2010/11

In million Birr
2006/07 2007/08 2008/09 2009/10 2010/11
Total Revenue and Grants 29380 39705 54637 66240 85611
D
Domestc R
Revenue 21796 29794 40184 53864 69120
Tax revenue 17353 23801 29008 43318 58981
(annual growth rate) 37 22 49 36
Direct taxes 5167 7015 9868 14906 19550
Indirect taxes 12186 16785 19139 28412 39431
Domestic indirect taxes 399
3997 5092
092 7325
32 10 2
10727 1 0
15705
Import duties & taxes 8189 11693 11814 17685 23726
Non-tax revenue 4444 5993 11176 10546 10139
Grants 7583 9911 14454 12376 16491
(In percent of GDP)
Total Revenue and Grants 17.1 16.0 16.3 17.3 16.7
Domestc Revenue 12.7 12.0 12.0 14.1 13.5
Tax revenue 10.1 9.6 8.6 11.3 11.5
Non-tax revenue 2.6 2.4 3.3 2.8 2.0
Grants 4.4 4.0 4.3 3.2 3.2
GDP at current market price 171989.0 248302.7 335392.0 382938.6 511157.0

4 Ethiopia: MoFED
 R
Recent
tTTrends
d in
i Public
P bli Finance:
Fi cont’d
t’d

 C: Government Expenditure
 During 2004/05 fiscal year about 57% of the total government
budget was allocated to the poverty reducing sectors and this
amount picked up to level of 64.2% in 2007/08 but goes down a
bit in 2008/09 to 63.1% budget and pick up again 66 percent in
fiscal year just finished 2010/11 .
 Moreover the donor communities had also made an agreement
with the government and channeled the entire untied grant to
support these sectors through Protecting Basic Services project
(PBS) since
i 2006
2006.
 Hence during the past four years tremendous improvements had
been witnessed in both quantity and quality of basic services ,

5 Ethiopia: MoFED
 Recent Trends in Public Finance: cont’d

Table 2 : General Government Expenditure Outturn,

Outturn 2006/07-2010/11
2006/07 2010/11
In million Birr
2006/07 2007/08 2008/09 2009/10 2010/11

Total Expenditure 35607 46915 57774 72598 93832

Current expenditure 17165 22794 27176 32537 40535
Capital expenditure 18442 24121 30599 40061 53297
o/w Pro- poor Expenditure (rec+Cap) 22360 30050 36213 47789 62378
(percentage share of total expenditure) 63 64 63 66 66
Education 8411 10012 12761 17249 23345
Health 2350 3405 3873 4693 6307
Agriculture 5113 6209 7502 6994 8246
Road 5001 8286 9804 13973 18543
water 1484 2139 2272 4882 5938
(In percent of GDP)

Total Expenditure 20.7 18.9 17.2 19.0 18.4

Current expenditure 10.0 9.2 8.1 8.5 7.9
Capital
p expenditure
p 10.7 9.7 9.1 10.5 10.4
o/w Pro- poor Expenditure (rec+Cap) 13.0 12.1 10.8 12.5 12.2
Education 4.9 4.0 3.8 4.5 4.6
Health 1.4 1.4 1.2 1.2 1.2
Agriculture 3.0 2.5 2.2 1.8 1.6
Road 2.9 3.3 2.9 3.6 3.6
water 0.9 0.9 0.7 1.3 1.2

GDP at current market price 171989.0 248302.7 335392.0 382938.6 511157.0

6 Ethiopia: MoFED
 Recent Trends in Public Finance: cont’d

 D: financing
 The Ethiopian macroeconomic situation during the past five years
so unique to the rest of the world, while the rest of the world
economy is under deflationary situation
situation, the Ethiopian economy
has faced a twin challenges (inflation and low foreign reserve).
 So the government adopt tight Fiscal and Monterey policies
 No fiscal space to finance the gap
gap,
 2008/09 fiscal year the government domestic borrowing has
completely eliminated, and private sector borrowing has been
significantly
g y squeezed.
q
 As a result a number of investments projects both private and
public have been postponed, some of planed government
expenditure has been cut, and public servant salaries kept
squeezed.

7 Ethiopia: MoFED
 Recent Trends in Public Finance: cont’d

Table 3: General Government Financing, 2006/07-2010/11

In million Birr
2006/07 2007/08 2008/09 2009/10 2010/11
Total Revenue and Grants 29380 39705 54637 66240 85611
Domestc Revenue 21796 29794 40184 53864 69120
Grants 7583 9911 14454 12376 16491
Total Expenditure 35607 46915 57774 72598 93832
Overall balance including grants -6227 -7210 -3137 -6358 -8221
Overall balance excluding grants -13811 -17121 -17591 -18734 -24712
Financing 6227 7210 3137 6358 8221
External (net) 1913 2396 3176 4131 7798
Domestic(net) 6246 6580 -417 1758 111
Residual -1931 -2774 -95 -228 -1146
(In percent of GDP)
Total Revenue and Grants 17.1 16.0 16.3 17.3 16.7
Domestc Revenue 12.7 12.0 12.0 14.1 13.5
Grants 4.4 4.0 4.3 3.2 3.2
Total Expenditure 20.7 18.9 17.2 19.0 18.4
Financing 3.6 2.9 0.9 1.7 1.6
External (net) 1.1 1.0 0.9 1.1 1.5
Domestic 3.6 2.7 -0.1 0.5 0.0
GDP at current market price 171989.0 248302.7 335392.0 382938.6 511157.0

8 Ethiopia: MoFED
 II: The Impact
p of the Global Economic downturn on the
Ethiopian economy

 The Government of Ethiopia and IMF studies the impact of the 2008
global economic crisis , which had serious impact on the country’s
low level of foreign reserve,
 As a result of high oil and food prices in 2008 and Global Economic
Crisis, the country’s reserve has declined significantly.
 Receipts from merchandise exports, remittances, export and FDI
had been under pressure,
 Hence the IMF (ESF arrangement) offered under, USD 297 million
BOP support at the end of 2009,
 As a result level of foreign reserve has been improved,

9 Ethiopia: MoFED
 III: The 2011/12 budget out look

 Real GDP growth in 2011/12 is expected to be within the

target of 11 percent;
 However, inflation continue to be a pressure as the 2010/11
moving average figure stood at 18.1 and month-to-month
growth is 38.1 percent;
 A radical measure has been taken on the Monetary and
Fiscal arrangement;
 Government decided stopping the direct advance credit
instrument from NBE to finance budget deficit, restrict
through TB sales;
 The implication is that financing of both the federal budget
would only be limited to the amount of domestic revenue
collected and donor’s disbursement ,

10 Ethiopia: MoFED
 The 2011/12 budget out look

 Implementation of the 5 year development plan, Growth and

Transformation Plan(GTP), 2010/11-2013/14,
 The GTP was formally presented to IMF and Other
development Partners, Accordingly, they said the GTP is
ambitious but attainable,
 On the other had, the IMF says Ethiopia should slow down its
economic growth to control inflation,
 The GOE see this view an poorly principle. Ethiopia will never
slow down its economic growth to control inflation. It’s quite
simple these huge government infrastructure projects employ
million of poor people, if slow down million will be lay off,( it is
just like to find a shoe to fit the foot than to cut the foot to fit
shoe).
h )

11 Ethiopia: MoFED
 The 2011/12 budget out look

 IImplementation
l t ti Arrangement
A t off the
th New
N MDGs,
MDG
 Regional support deepening fiscal decentralization have been
and will continue to be the central public policy of the
government, t
 As part of realizing this objective GoE continued its commitment
to devolve fiscal power to the lower level of government,
 In EFY 2004 (2011/12) Birr 15 billion has been allocated for the
regional governments apart from the BG transfer allocation,

12 Ethiopia: MoFED
Ethiopia: MoFED