In the newly unveiled 1.93 trillion birr national budget, Ethiopia stands at a decisive fiscal crossroad — not between failure and success, but between stabilization and revitalization.
Finance Minister Ahmed Shide deserves, at the very least, a firm high-five for maintaining composure in one of the toughest macroeconomic balancing acts the nation has faced since its transition to market-led reforms.
First, the decision to halt direct borrowing from the National Bank of Ethiopia is a commendable act of fiscal discipline. For years, the monetization of deficits — essentially printing money to fund state operations — led to spiraling inflation, currency depreciation, and distorted savings behavior. This year’s budget signals that Ethiopia is no longer playing that dangerous game. That is not just a win in the language of macroeconomics; it’s a structural pivot toward credibility in both domestic and international financial markets.
Inflation has also cooled significantly — from over 30% to around 18%. This didn’t happen by luck. It required coordinated fiscal tightening, an upward revision of interest rates, and a clampdown on reckless liquidity expansion. That’s textbook central banking — and in an economy that had become a victim of its own inflationary inertia, this reset matters.
So yes, let’s extend credit to the Ministry of Finance led by Mr. Ahmed Shide: Ethiopia’s economic managers are no longer kicking the can down the road. They’re picking it up, examining its dents, and charting a course to fix the road itself.
But a high-five, while deserved, does not mean a standing ovation. The budget, while disciplined, is thin on developmental oxygen. No new large-scale infrastructure projects as noted some financial experts who scrutinized the details of the budget and opined via writing. No stimulus for the private sector. No tax relief for low-income citizens or incentives for job creation in strategic sectors as borrowed from them. In short: this is a budget that speaks fluent austerity, but whispers when it comes to hope.
This brings us to a vital question: how do we grow?
The 8.9% growth projection is ambitious — and ambition is not a crime. However, growth, in any economic model, requires inputs. Public investment, private credit, consumer demand, and export dynamism must all fire simultaneously. When fiscal policy tightens and credit contracts — while household incomes remain compressed — one must ask: where does this projected growth truly emerge from? Because while statistical optimism can impress rating agencies, it cannot feed hungry households.
The opposition’s concerns are also rooted in legitimate fears. Many feel this budget leans more toward pleasing Washington than empowering Wellega or Wajale. There is growing unease that IMF-aligned reforms may translate into domestic neglect — that Ethiopia is balancing its books at the expense of social contracts and public expectations.
Indeed, as one opposition leader noted, “you can’t tax your way to prosperity.” Ethiopia’s tax-to-GDP ratio is climbing — commendable from a fiscal mobilization lens, but painful for citizens already gasping under economic strain. If taxes are rising but services remain stagnant, political discontent is not just likely — it is inevitable.
What’s required now is a second wind — a recalibration that builds on the gains while responding to the country’s deeper structural gaps. A mid-year fiscal review should be considered to reallocate a portion of the budget toward targeted, localized stimulus: small-scale irrigation, affordable housing schemes, and SME support in regions recovering from conflict. Parallel to that, targeted tax relief must be introduced for low-income professionals — particularly teachers, nurses, and first-time entrepreneurs — the real economic anchors of our society. The government should also introduce domestically issued infrastructure bonds to finance growth with popular buy-in, inviting the diaspora and public institutions to invest in long-term development. And lastly, a renewed focus on public expenditure efficiency — eliminating procurement leakages and enhancing value-for-money — will ensure that every birr not only counts but compounds.
In conclusion, the budget is neither an illusion nor a miracle — it’s a transition document. It stabilizes the frame, but doesn’t yet fill the picture. For that, we need boldness that doesn’t just serve creditors but centers citizens. Still, high-five to the Ministry of Finance for delivering a budget that chose discipline over decay.
But let that high-five be followed by a handshake with the people — one that says, “We’re stabilizing today, but we haven’t forgotten tomorrow.”
Mohamud A. Ahmed – Cagaweyne
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