ADDIS ABABA, Ethiopia — Ethiopia’s federal cabinet has approved a record-setting national budget of nearly 2 trillion birr (approximately $15 billion) for the 2025/26 fiscal year, marking a 31 percent increase from the previous year.
The announcement signals the government’s aggressive push to stimulate economic recovery, strengthen national security, and aid disaster-stricken communities across the country.
The budget, approved during a cabinet meeting chaired by Prime Minister Abiy Ahmed, reflects the administration’s growing emphasis on productivity, resilience, and stability amid Ethiopia’s challenging post-conflict recovery and structural reforms.
In a statement released by the Office of the Prime Minister, the government said the proposed budget aligns with its broader economic reform agenda under a four-year agreement supported by the International Monetary Fund (IMF).
The IMF-backed program, worth $3.5 billion, is aimed at curbing inflation, restructuring debt, and modernizing key economic sectors.
“This budget represents a major step toward rebuilding the foundations of a resilient and inclusive economy,” said Eyob Tekalign, Ethiopia’s State Minister of Finance.
“We are prioritizing national security, food systems, energy, and the capacity of local governments to deliver services.”
A Focus on Recovery and Growth
A significant portion of the new budget will be directed toward national security and defense—a move seen as necessary given the lingering fragility in parts of northern Ethiopia, the Oromia region, and areas impacted by drought and internal displacement.
At the same time, the government has pledged to scale up investments in agriculture, industry, and public infrastructure, while bolstering social safety nets for vulnerable populations.
Over 7 billion seedlings have already been prepared under the Green Legacy Initiative to fight deforestation and support climate resilience.
Analysts say the budget expansion is both ambitious and risky, given Ethiopia’s fiscal pressures and ongoing negotiations with international creditors.
“Ethiopia’s fiscal stance is increasingly dependent on disciplined implementation,” said Tsedey Fekadu, a macroeconomic analyst based in Nairobi.
“While the political will is there, inflation control and revenue generation remain critical to making this budget work.”
An Eye on Inflation and Debt
The approval comes as Ethiopia continues to battle inflation, though recent figures suggest signs of moderation. Annual inflation is projected to fall to around 10% in the coming fiscal year—the lowest in nearly a decade—according to projections released by the Finance Ministry.
To support the budget, the government has vowed to improve domestic revenue mobilization and restructure inefficient public enterprises. Reforms to float the Ethiopian birr and open the country’s financial sector are also underway, as part of commitments to the IMF.
Still, Ethiopia’s growing debt burden remains a challenge. The government is negotiating with external creditors, including China and members of the Paris Club, to ease repayment terms. Domestic borrowing has also been on the rise.
Despite the challenges, officials say the budget reflects optimism and renewed momentum for reform. “We are turning a page,” said one senior government adviser. “This is a transformative year for Ethiopia—fiscally, socially, and politically.”
The new fiscal year begins on July 8, 2025.
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