External partners’ direct budgetary assistance continues to fall short of expectations, leaving officials disappointed.
During the first half of the current fiscal year, only a quarter of the planned external grant has been secured.
In the first half of the fiscal year, the government planned to bring in 20 billion birr in budgetary support from external partners, out of a total of 39 billion birr for the whole year.
In an interview with the state-affiliated Fana Television on March 1, 2023, Fitsum Assefa (PhD), the Minister of Planning and Development, blamed the war in north Ethiopia for the drop in external aid.
The two-year war has forced external partners to apply stringent policies when approving aid for the country due to human rights concerns.
“The prior two years were more difficult than the first half of the current fiscal year,” Fitsum explained.
Bilateral and multilateral partners have shifted from project support to humanitarian efforts as they extend aid in the rebuilding process of war-ravaged areas.
“Instead of providing direct budget support to the Ethiopian government, they were diverting funding to humanitarian actors,” Fitsum explained.
The Minister also cites the coronavirus pandemic and the Russia-Ukraine war as reasons for the decline in external aid inflows, claiming that the two big global crises influenced development partners’ decisions.
For the current fiscal year, the government has allocated 786 billion birr. The government is expected to collect 477 billion birr from tax and non-tax sources, leaving a deficit of 309 billion birr. The deficit is forecasted to widen as budgetary support from external partners diminishes.
“Unfortunately, our development ambitions and resources do not match. Consequently, in addition to loans, FDI, and other ways, we normally look for additional budget support for our development projects,” Fitsum explained the need for reliance on external aid.
Peace is a prerequisite for donor and development partner assistance. Fitsum is optimistic about meeting the annual target by the end of the fiscal year, now that peace has returned to the northern Ethiopia following the agreements reached between warring parties in Pretoria and Nairobi.
Fitsum disclosed the backup plan in case luck isn’t on the government’s favor when it comes to external grants.
If the funding does not materialize, she revealed the government’s plans to mobilize domestic resources, such as selling Treasury bills, which she describes as “the hardest path.” Fitsum seemed hopeful that the next six months will improve to reach the target.