Ethiopia to Raise Spending by 21% in 2025 Budget Amid Debt Talks

ADDIS ABABA — Ethiopia will increase its spending by 21% in its 2025 budget, marking the first budget since the nation defaulted on a eurobond payment and began discussions on economic reforms with the International Monetary Fund (IMF), Bloomberg reported on Tuesday.

Finance Minister Ahmed Shide announced plans to allocate 971.2 billion birr ($16.9 billion) for the fiscal year starting in July during a budget speech to lawmakers. The projected fiscal deficit remains at 2.1% of the gross domestic product (GDP), consistent with the current fiscal year.

To address the 358.5 billion birr deficit, Ethiopia intends to utilize both local and foreign borrowing, Shide explained. The domestic portion will be financed through government treasury bills and medium-term bonds.

Despite the anticipation of substantial external donor support, Ethiopia will primarily depend on domestic markets to finance its budget shortfalls, according to Giulia Filocca, a senior analyst at Standard & Poor’s.

“While the government has secured some external financing from the World Bank and the European Union, negotiating an IMF program will be crucial to easing pressure on local banks and securing overall debt relief,” Filocca said. “We expect an IMF program to be signed this year, but the timeline remains uncertain due to ongoing political developments and challenges related to foreign-exchange reforms.”

The budget increase and ongoing discussions with international financial institutions reflect Ethiopia’s efforts to stabilize its economy and manage its debt amidst a challenging fiscal environment.

©️ All East Africa

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