Addis Ababa, Ethiopia – Ethiopia’s federal government has unveiled its proposed budget for the upcoming fiscal year 2025/2026 (2018 Ethiopian Calendar), totaling 1.93 trillion Birr. The budget, presented to the House of People’s Representatives on June 10, 2025, is drawing significant criticism for its continued prioritization of existing projects at the expense of initiating new ones, a trend that has persisted for the last three years.
According to a BBC Amharic report, the budget allocates 415.2 billion Birr for capital expenditure, representing a mere 21.6% of the total annual budget. This figure marks a continuous decrease in capital allocation over the past five years, dropping by 11% since 2022. The largest share of the budget, 61.4%, is earmarked for regular expenditures, with support for regional states taking the third-largest portion after regular and capital spending.
The Ministry of Finance’s budget statement indicates that the 2025/2026 budget was prepared with a “limited budget deficit.” However, a significant budget gap of 416.8 billion Birr is projected for the upcoming fiscal year out of the 1.93 trillion Birr total.
A Cost of Development Stagnation and Growing Concerns
The government’s sustained policy of freezing budgets for new projects, now entering its third consecutive year, is raising profound concerns about its long-term implications for Ethiopia’s economic growth and public welfare. This approach is attributed by the government to a “slowdown in development cooperation,” highlighting a significant reliance on external financial support.
While the completion of ongoing projects is undoubtedly crucial for efficiency and resource optimization, a prolonged absence of new initiatives can lead to several severe negative implications:
- Stifled Economic Growth and Diversification: New capital projects are vital catalysts for economic expansion. They stimulate industrial growth, foster innovation, and create new sectors. By halting these, Ethiopia risks a slowdown in overall economic dynamism and its ability to diversify its economy beyond traditional sectors.
- Exacerbated Unemployment: Major infrastructure and development projects are significant employers, particularly for the vast youth population and those in unskilled labor. The sustained lack of new projects directly impacts job creation, potentially worsening unemployment rates and contributing to social discontent.
- Delayed Access to Essential Services and Infrastructure: New projects are indispensable for expanding access to critical public services like healthcare, education, and clean water, as well as essential infrastructure such as roads, energy grids, and digital connectivity. A prolonged halt means a delay in addressing fundamental societal needs and improving living standards for a rapidly growing population.
- Erosion of Future Productive Capacity: Without continuous investment in new productive capacities and modernization, the country risks falling behind regionally and globally. This could lead to a less competitive economy and a diminished ability to meet future demands.
- Declining Public Confidence and Trust: As noted by parliamentary members, the public directly benefits from tangible capital projects. A perceived stagnation in new development, despite significant budget allocations for regular expenditures, could erode public confidence in the government’s long-term vision and its capacity to deliver on development promises.
- Vulnerability to External Shocks: The stated reason of “slowdown in development cooperation” underscores Ethiopia’s vulnerability to external financial flows. Over-reliance on existing projects and a lack of new initiatives could make the economy more susceptible to fluctuations in foreign aid and investment landscapes.
The substantial budget deficit of 416.8 billion Birr further complicates the picture, suggesting that even maintaining current operations is a fiscal challenge. The ongoing parliamentary scrutiny reflects a growing demand for greater transparency, a clearer strategy for long-term investment beyond simply completing existing ventures, and a robust plan to reignite the engines of new development.
