(Bloomberg) — Ethiopia’s finance ministry proposed an additional 122 billion birr ($2.47 billion) budget to help counter the fallout of a civil war that’s destroyed infrastructure, displaced millions, eroded government revenue and deterred investment.
The extra allocation for the financial year ending July 7, which will bring total spending for the year to 683.7 billion birr, will be used for national security, humanitarian assistance and rehabilitating infrastructure, the ministry said in a Facebook post on Thursday.
“The additional budget was needed due to the war in the northern part of the country, the government’s inability to meet the current demand for revenue and the need for additional expenditures,” it said.
The extra spending will be funded via domestic borrowing and readjusting expenditure from previously approved budgets, Finance Minister Ahmed Shide said in a text message. Earlier this week, the Council of Ministers agreed to scrap petroleum product subsidies in six months time.
Read more: How Ethiopia’s Rift With Tigray Rebels Has Deepened: QuickTake
The conflict between federal forces and dissidents from the Tigray province has coincided with the coronavirus pandemic, and stunted economic growth in what was one of the world’s fastest-expanding economies. Gross domestic product grew 6.3% last year, and the International Monetary Fund expects a 2.1% expansion this year.
Manufacturing plants in industrial parks in the Tigray and neighboring Amhara regions have been looted, and transport links, power plants and telecommunications infrastructure have been damaged since the war erupted in November 2020, while farmlands and villages have been destroyed. PVH Corp., manufacturer of brands including Tommy Hilfiger, closed its garment manufacturing plant in Ethiopia in November.
The government’s failure to end hostilities has seen western nations withdraw budgetary support and the state has been working to increase domestic tax revenue. The finance ministry had also rescheduled some projects and sought to contain expenditure.
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