House Of Federation Decries Exclusion, Inequity In Federal Subsidy Allocations

Members of the House of Federation (HoF) have decried the exclusion of newly formed regional states and disputed territories from federal budget subsidy allocations.

The House, which is mandated to address issues pertaining to constitutional interpretation, held its opening session this week after a two-month recess. Among the issues on the agenda were border and ethnic issues across the country, budget subsidy allocations to regional states, and inequity in public project distribution.

Regional administrations receive federal subsidies each year based on a budget-sharing formula devised by the House six years ago. The formula takes into account population, need, and revenue generating capacity.

This year, 415 billion Birr is reserved for regional subsidies, up from 215 billion Birr two years ago. The Oromia, Amhara, Somali, and Tigray administrations are slated to receive more than half of the total.

Newly formed regions such as South Ethiopia, Central Ethiopia, and South West Ethiopia, as well as disputed territories between the Amhara and Tigray regions, have yet to be included in the allocation formula.

HoF members want to know why.

“The Ministry of Planning and Development said these areas would be included in the formula starting from the current 2025/26 fiscal year. However, they remain excluded. Now, the only option is to include them next year. As a result, these areas are facing critical budget shortages,” said one member.

Another member pointed out that newly formed regional states have been omitted despite holding federal recognition.

“This is unconstitutional,” he said.

Both members pointed out discrepancies in the distribution of public projects.

“There is no clear standard or formula to ensure the equitable distribution of projects among regional states. This is also causing uneven development,” said the first.

“We hear that the federal government is allocating huge budgets for capital projects in the new regional states. However, none of these projects are in progress. There must be a critical performance audit,” said the second.

House members pointed out that budget subsidy allocations have shrunk relative to the exponentially growing federal budget.

“Some regional states, especially the new ones, are failing to cover salaries for teachers, health workers and civil servants. Federal projects in the regions are also depleted. For instance in the South West Ethiopia region, including Tepi, Dawro and other parts, all projects have stopped. Even projects started before the new budget formula, including roads, airports and others have stopped,” said the members.

Members of the House Budget Affairs Committee and Speaker Agegnehu Teshager attempted to address the issues.

According to them, the House’s plan to introduce a new subsidy allocation formula this year was foiled by failure on the part of the Ministry of Planning and the Central Statistics Service (CSS) in providing updated data on the regions in question.

“Available population data for these new regional states is available only for 2019, which is very outdated. We cannot use outdated data for new budgeting. Therefore, we have been using the old population data of SNNPR to determine budgets for the new regions that split off from SNNPR,” said a committee member.

The Ministry and CSS are reportedly carrying out data collection in a bid to update records, but the work could take up to three years.

“Once the data collection is finalized and submitted to us, HoF will start including the new regional states under the new budget formula,” said a committee member.

Agegnehu made a similar argument.

“The major reason for us failing to include the new regional states under the new budget formula is the absence of updated data. Allocating a budget without data leads to uneven and unfair development among regions. Regions are exhibiting uneven growth,” said the Speaker.

He said the exclusion of new regional states from subsidy allocation and the issue of uneven growth are a priority for the administration of Prime Minister Abiy Ahmed.

“The macroeconomic team and the PM are closely following the issue. As the House of  Federation, we cannot use administrative data to allocate the budget formula. We use only official data provided by MoPD and CSS. We will include the new regional states into the new budget formula as soon as we have the data,” said Agegnehu.

He said the House has urged the federal government to communicate and work with regional administrations to provide a temporary solution/

“Transitional solutions are necessary for the new regional states and disputed areas suffering from budget shortages. This transitional solution must come immediately,” said the Speaker.