Ethiopia: Foreign Debt Service Takes Priority in Record Federal Spending Bill

Repayment of foreign debt is slated to eat up close to 30 percent of the record 1.93 trillion Birr federal budget proposed to lawmakers for the 2025/26 fiscal year, according to Ahmed Shide, minister of Finance.

On Tuesday, the Minister told Parliament that an estimated 463.3 billion Birr is earmarked for foreign debt service over the coming year.

The bill, which was approved by the Council of Ministers last week, proposes to allocate 1.18 trillion Birr for recurrent expenditures and 415 billion Birr for capital expenditures. A further 415 billion Birr is reserved for regional subsidies, with the Oromia, Amhara, Somali, and Tigray administrations slated to receive more than half of the total.

The bill does not specify a subsidy budget for Addis Ababa, despite the City Administration receiving 5.4 billion Birr last year. Its authors foresee spending 7.2 percent of the total budget on education, 3.8 percent on health, and close to six percent on defense.

The Minister told MPs the proposed budget represents a 416.8 billion Birr deficit, nearly half of which is expected to be covered by domestic borrowing.

– Advertisement – The 2025/26 budget is more than double the 971.2 billion Birr lawmakers approved last June, but represents a significant cut in dollar terms. At current exchange rates, the proposed budget is approximately USD 15 billion, down from an estimated USD 17 billion last year, not including the 582 billion Birr supplementary budget approved in November. Lawmakers will vote on the budget before the new fiscal year begins on July 8, 2025.