Ethiopia budget to expand by 22 per cent to fight poverty

Reuters, Sunday 12 Jun 2011

Record spending for instructure, health and education will be mainly covered by domestic revenues with balance generated by loans and grants, says draft

Ethiopia has proposed a record 117.8 billion birr ($6.98 billion) annual budget for next year, aiming to build infrastructure, health and education services in one of Africa's fastest growing economies.

Although still one of the world's poorest countries, the Horn of Africa nation says its economy has grown by an annual average of 11 per cent over the past five years, one of the continent's highest rates.

Ethiopia devalued its currency by 10 per cent in 2009 to boost foreign reserves.

The first draft of the 2011/2012 (8 July -  7 July) budget shows spending up by 22 per cent from the $5.7 billion endorsed in 2010/2011.

Domestic revenue accounts for more than 67 per cent of the proposed budget, with the rest generated from external loans and grants, the draft says.

Prime Minister Meles Zenawi and his council of ministers passed the proposal late on Friday and it will be presented first to a parliamentary committee, before Meles presents it to parliament for approval in early July, finance ministry spokesman Haji Ibsa told Reuters.

Addis Ababa has been attracting interest from investors, many from China and India, looking to its agriculture, oil and gas exploration and hydropower sectors.

Opposition parties say the ruling party inflates the country's growth figures to attract investment and that growth has not filtered down to the poor in a country where last year, 13 million out of 80 million people needed foreign food aid.

While the government forecasts growth of 11.4 per cent this year, the International Monetary Fund says it will be only about 7.5 per cent.

The Washington-based body predicts the figure will slow to about 6 per cent in the 2011/12 fiscal year, due to high inflation, restrictions on private bank lending and a trickier business environment.

Ethiopia's year-on-year inflation rate surged for a second straight month to 29.5 per cent in April, from 25 per cent a month earlier.

Of the total budget, 48.7 billion birr ($2.89 billion) will be used to improve health, infrastructure and education services, according to the proposal.

Ethiopia has spent over $3.6 billion on the construction of roads over the last decade.

Regular spending is up by 35 per cent to 23.3 billion birr.

"We have a very efficient tax system now and we are confident we will hit the target," said Melaku Fenta, Director of the Ethiopian Revenues and Customs Authority.

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