The federal government has allocated 542.1 billion Br for domestic and external debt servicing in its proposed 2019 fiscal year budget, making debt repayment the single largest expenditure item in the spending plan.
The allocation represents an increase of nearly 79 billion Br compared to the current fiscal year and accounts for 43.3pc of the government’s recurrent expenditure budget.
Related articles
The federal government has proposed a record-high budget of 2.34 trillion Br for the fiscal year beginning in July. According to budget documents distributed to members of parliament, managing the country’s growing debt burden was among the key considerations in drafting the budget.
Officials indicated that both domestic and foreign debt obligations were taken into account when preparing the spending plan, particularly within the recurrent expenditure framework.
Of the 542.1 billion Br earmarked for debt servicing, 293.3 billion Br is allocated for external debt repayments, while 248.7 billion Br is designated for domestic debt obligations.
The government’s recurrent expenditure budget for the upcoming fiscal year stands at 1.23 trillion Br, with debt servicing consuming the largest share. The allocation marks a 17pc increase from the amount budgeted for debt payments in the current fiscal year.
Budget documents show Ethiopia’s total public debt stock reached 52.75 billion dollars by the end of the 2017 fiscal year, with external debt accounting for 64.4pc of the total.
While the country’s external debt stock declined slightly during the 2014 and 2015 fiscal years, it rose again in 2017, largely due to increased inflows of concessional financing and budget support.
“The increase is mainly attributed to concessional loans released by development partners, particularly the IMF and the World Bank, to support macroeconomic reforms,” the budget document states.
As a result, Ethiopia’s external debt stock increased from 29.6 billion dollars at the end of the 2016 fiscal year to 34 billion dollars by the end of 2017.
The document also notes that domestic debt has been increasing over time. However, its share of total public debt fell from 57.4pc at the end of the 2016 fiscal year to 35.6pc in 2017, a shift largely attributed to the foreign exchange market reforms introduced during the year.
Those reforms led to a significant depreciation of the Birr against major foreign currencies, increasing the value of external debt when measured in local currency terms.
According to a Ministry of Finance report presented to lawmakers earlier this year, Ethiopia’s total public debt had reached 51.8 billion dollars by March 2026, including 33.5 billion dollars in external debt.
Despite being the largest expenditure category in the budget, the 542.1 billion Br allocated for debt servicing would cover only a small portion of the country’s overall debt stock.
Beyond debt repayments, budget support receives the second-largest allocation at 238.1 billion Br. The education sector ranks third with a proposed budget of 158.2 billion Br, moving up from fourth place in the current fiscal year.
A contingency allocation of 124.4 billion Br is the fourth-largest budget item, significantly lower than the 269 billion Br allocated for contingencies in the current fiscal year.
Road infrastructure rounds out the top five spending categories, receiving 123.8 billion Br, an increase of 28.8 billion Br from the previous year.
The proposed budget is expected to be deliberated by lawmakers in the coming weeks ahead of the start of the new fiscal year.
Source: Ethiopia Insider
