Ethiopia Sets Ambitious Revenue Goals to Overcome Economic Challenges
Ethiopia has set high revenue targets as part of its agreement with the International Monetary Fund (IMF) to reform its economy, which is the largest in the region. Prime Minister Abiy Ahmed announced that the country aims to generate 1.5 trillion birr ($12.5 billion) in revenue for the fiscal year ending in July, exceeding the initial budget of 613 billion birr proposed by the finance ministry.
To achieve this ambitious goal, the Ethiopian government has introduced new taxes, including a value-added tax on banking services, property taxes, and an excise tax on telecommunication services. Despite a promising start with a 65% increase in revenue collection in the first quarter, reaching 180 billion birr, the amount still falls short of the annual target.
Ethiopia has been facing financial challenges due to the impact of the COVID-19 pandemic and a two-year civil war that concluded in November 2022. In December, the country became the third economy in Africa to default on its government debt. To address this crisis, Ethiopia secured a $3.4 billion bailout from the IMF in July, following the default on a eurobond due in December. As part of the agreement, Ethiopia had to allow its currency to float freely to stabilize the economy.
In addition to these measures, Ethiopia is opening up its financial sector to foreign investors and moving forward with plans to privatize state-owned enterprises, including the country’s largest telecommunications company. These reforms demonstrate Ethiopia’s commitment to economic restructuring in the face of fiscal challenges.
Prime Minister Abiy emphasized the importance of improving tax collection in Ethiopia, stating, “Ethiopia has a low tax-collection rate due to many sectors operating informally. We are focused on reforming tax laws, enhancing tax administration, automating processes, and changing the mindset of tax workers.” These efforts aim to increase revenue generation and promote economic growth in Ethiopia.
In conclusion, Ethiopia’s pursuit of ambitious revenue goals and economic reforms reflects its determination to overcome financial difficulties and build a more stable and prosperous future for its citizens.
