Ethiopia sees budget deficit at 2.1% of GDP next fiscal year

By Dawit Endeshaw

ADDIS ABABA (Reuters) – Ethiopia’s budget deficit is estimated at 2.1% of gross domestic product next fiscal year, the East African country’s finance minister Ahmed Shide said on Tuesday.

Ethiopia is emerging from several economic shocks including the COVID-19 pandemic, a devastating two-year war in the northern Tigray region and extreme weather events.

Already struggling with high inflation and chronic foreign currency shortages, it became the third African state in as many years to default on its debt in December.

Despite the challenges, Ahmed said economic growth is expected to inch up to 8.4% in the fiscal year starting in July, from 7.9% this year. He did not give an estimate for the current fiscal year’s deficit as a percentage of GDP.

“In recent years Ethiopia has faced a number of social, economic and political challenges. And a wide range of reforms have been implemented to address those challenges,” Ahmed said.

The government’s priorities for the year were controlling inflation, solving foreign exchange shortages, reducing debt to healthier levels and fixing the country’s balance of payments deficit, he said.

He set 2024/25 budget spending at 971.2 billion birr ($17 billion), up 21.1% from the previous year, with 451.3 billion birr to be spent on recurrent expenditure, and 283.2 billion birr on capital expenditure.

Revenues, including external assistance, for the next year were estimated at 612.7 billion birr, Ahmed said.

Ethiopia may need to agree to a big currency devaluation to secure the rescue loan it is trying to negotiate with the International Monetary Fund, analysts say.

A dearth of hard currency and a tightly controlled official exchange rate has led to a flourishing black market, where the birr trades around twice as weak as the official rate.

($1 = 57.1537 birr)

(Reporting by Dawit Endeshaw; Writing by Hereward Holland and Bhargav Acharya; Editing by Alexander Winning and Christina Fincher)


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