Friday, January 27, 2023
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BusinessDefense budget weighs on upcoming budget bill

Defense budget weighs on upcoming budget bill

It has reached  100 billion birr

Ethiopia’s defense budget for 2022/23 fiscal year is slated to be a staggering 100 billion birr, constituting significant pie of government’s expenditure for the next year.

The Ministry of Finance has also decided the total budget for the upcoming fiscal year to be 785 billion birr, The Reporter learnt.

The defense budget is five times higher what was approved for the same purpose during the existing fiscal year, excluding the supplementary budget greenlighted by the parliament later.

The government approved 90 billion birr supplementary budget for defense,in January 2022, which increased total defense expenditure for 2021/22 fiscal year to 110 billion birr. It is an outcome of the federal government’s military operations in northern Ethiopia.

The surge in the next year’s defense budget to 100 billion birr is also related to building up the country’s military capacity, according to sources.

The Ministry of Finance, which has been hearing budget proposals of all institutions, is expected to present the budget document to the council of ministers this week, which will be then approved before the parliament recess in June.  

Meanwhile, the Ministry of Finance has been telling institutions to reduce their proposed amount of budget for the next year, as the government is bounded by budget constraint.

The ministry told almost all institutions have proposed budget above the ceiling. Hence, institutions are told to postpone new projects to 2023/24 fiscal year. Capital projects worth 26 billion birr are also already postponed from the current fiscal year, according to the Ministry. The new budget is largely earmarked to rebuild infrastructures and public services damaged by the yearlong war in northern Ethiopia.

The total budget for the next fiscal year is 224 billion higher compared to the 561 billion budget approved for the current fiscal year last June, excluding the 122 supplementary budget for the current fiscal year. But in actual, the new budget increased by 102 billion birr, considering the supplementary budget. Hence, the new budget increased by 18 percent, which is similar to this year’s budget increment rate. The budget for the current 2021/22 fiscal year also grew by 18 percent.

Alemayehu Geda (PhD) professor of economics at AAU, such lofty budget increases will fuel the inflation. “If government continues deploying the same old model of financing, which is largely domestic credit, it will fuel the inflation. Government must look for alternative financing sources that will not contribute to the inflation.”

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