Gov’t Plugs 262.3 Billion Birr Budget Deficit Through Domestic Borrowing

Fertilizer, fuel subsidy costs top 150bln Birr

The Ministry of Finance has revealed that the government plugged a massive 262.3 billion Birr budget deficit in the 2024/25 fiscal year through domestic borrowing instruments while also securing international debt relief commitments worth USD 3.5 billion.

The Ministry annual performance report published last week details fiscal discipline measures, external financing inflows, and a tightened audit and digital oversight framework.

The document obtained by The Reporter details that the budget deficit was covered through indirect borrowing from the National Bank of Ethiopia (NBE) through instruments like treasury bonds.

Fears of stoking inflation meant there was no direct borrowing from the central bank, according to the report.

According to the figures cited, 95.3 billion Birr was raised through Treasury bills and 167 billion Birr through bonds. The government also exempted 2.2 billion Birr worth of basic food commodities from tax and customs duties, foregoing revenue to protect households from inflationary shocks.

Additionally, a 213.2 billion Birr guarantee was extended to the Commercial Bank of Ethiopia to support regional agricultural input purchases.

Fertilizer headlined government subsidy expenditures at 84 billion Birr last year, followed by 70.5 billion for fuel, 60 billion on food security, 15 billion on medicine, and nine billion on edible oil, according to the Ministry.

The report indicates that revenue targets were nearly met, with a 96.1 percent collection rate. Total federal and regional expenditure reached 1.26 trillion Birr, complemented by 288.8 billion Birr in subsidies to regions, the document noted.

The Ministry reports that Ethiopia’s development partners provided substantial external backing, with commitments of USD 5.6 billion and actual disbursements of USD 5.5 billion, exceeding the intended target set for the fiscal year.

Actual inflows amounted to USD 4.5 billion, with the World Bank accounting for USD 3.9 billion. On the front of the private sector, the document stated that “through the Invest in Ethiopia High-Level Business Forum, USD 1.6 billion investment agreements were signed.”

The report also touched on debt restructuring and relief under the G20 Common Framework.

Ethiopia’s total public debt registered at USD 52.7 billion at the end of the 2024/25 fiscal year, with external debt accounting for nearly two-thirds. While domestic debt has fallen in dollar terms owing to the massive devaluation recorded in the wake of the liberalization of July 2024, it has surged to more than 2.5 trillion Birr in domestic accounting.

The Ministry also announced that Ethiopia has secured USD 3.5 billion in debt relief under the G20 Common Framework, while debt restructuring negotiations with China and the Paris Club are in their final stages with an agreement expected to transpire soon.

The report also detailed concerns about public finance audits and oversight.

The Ministry states that although Parliament approved a supplementary budget of 582 billion Birr halfway through the fiscal year, 170 of the 680 budgetary institutions have failed to submit reports related to the additional financing, raising concerns about accountability.

The report disclosed that 22 institutions received adverse or disclaimer audit opinions, leading to the issuance of written warnings to seven of them and financial penalties and warnings to senior officials at three other government agencies.

Ten government institutions were recognized for a stellar audit performance, according to the report.

The Ministry highlighted progress in digital oversight, stating that 169 federal institutions are now fully using the electronic government procurement (e-GP) system and that 96.6 percent of 588.6 billion Birr in government payments were processed electronically.

The report noted that 947 attempted cyber attacks on Ministry systems were successfully blocked.