Government plans to cover deficit with domestic borrowing
The Parliament approved an additional budget of 90 billion birr defense budget for the coming six months, more than four times higher than the original budget approved for the whole year in June 2021.
It is part of the 122 billion birr supplementary budget approved by the parliament for the existing fiscal year. With only five billion birr allotted to rehabilitate war-affected regions in North Ethiopia, the lion’s share of budget goes to defense, particularly to buy uniforms and food items for the army.
Officials, who are already troubled by the widening budget deficit, wanted to finance the budget with domestic borrowing. This comes as the government faces a slump in foreign aid, which used to be a major instrument to finance the deficit in the past due to the war in the north, souring diplomatic relations with the west.
Out of the total supplementary budget, eight billion birr is allocated for emergency food procurement and similar amount is held for contingency. Another seven billion birr is allotted to finance the deficit caused by the unmatched growth of tax revenues with expenditure of the government.
On July 5, 2021, the Ethiopian parliament approved a budget of 561.67 billion birr for the 2021/2022 fiscal year, which started on July 8, 2021. Out of the total budget, the share of defense was 22 billion birr.
The historic supplementary budget bill was approved by the Parliament with a majority vote and nine MPs voting against the bill, while seven abstained.
During the session on Friday, MPs expressed their displeasure with the allocation made by the Ministry of Finance in the supplementary budget. Some questioned the government’s decision to allocate five billion birr for rehabilitation of conflict-affected areas of the Amhara and Afar regions.
An MP, Abdil Kerim Abdi, criticized the federal government for ignoring the drought that broke out in Somali region, while asking the budget to be reviewed again.
Similarly, another MP, Kefna Ifa (PhD) pointed out the dire drought situation in Borena, Guji, Somali, and in some Afar region areas, calling for the amendment of the budget, citing humanitarian crises in the northern Ethiopia conflict.
There were also MPs who have requested a budget to be allocated for Special Forces of the region.
“While the Amhara and Afar Paramilitary forces, Special Forces, and militias were fighting alongside the national defense forces in the year-long conflict, there was no budget allocation to these forces and will not be appropriate,” said Desalegne Chane (PhD) an MP representing an opposition party.
A handful of MPs have also said the amount of money allotted for the rehabilitation program of conflict-affected areas is not enough.
State Minister of Finance, Eyob Tekalign (PhD), responding to questions from lawmakers, said the government is conducting an assessments on rehabilitation programs with a group of international experts and the final outcome will be announced in the coming December.
“Once the assessment is finalized, rehabilitation efforts will be conducted together with the support of international partners,” said Eyob, adding 420 million birr was secured for the rehabilitation project from development partners.
Responding to the request made by MPs for an approval of budget for regional security forces, Eyob said organizing and financing regional forces is the responsibility of regional states.
“The federal government has no mandate to provide financial support for regional forces,” Eyob said.