Budget grows by 3.6 % in birr, shrunk by 15% in dollars

The Ministry of Finance and Economic Cooperation (MoFEC) has tabled the 2018/19 budget at the parliament with a lower capital budget compared with the 2017/18 budget year.
In his 22 page budget speech Abraham Tekeste (PhD), Minister of MoFEC, tabled a proposal which will most likely be approved by the parliament before the end of the current budget year. The budget is   346.9 billion birr. This is a growth of 3.6 percent compared with the current budget year. Even though the budget has shown a 12 billion birr increase it has significantly decreased compared with hard currency, which is the major resource for importing items.
Accordingly in the 2017/18 budget year the government’s budget was USD 13.9 billion, which has now shrunk to USD 12.5 billion because of the 15 percent devaluation applied in October 2017.
Even thought the government has approved 320 billion birr for this year the actual disbursement has been reduced by 50 billion birr according to the Finance Minister.
He said that for the budget year it has been targeted to collect over 200 billion birr from tax. “While the actual collection would not be expected to surpass 150 billion,” he said. For the current budget year several governmental projects have been transferred due to lack of the expected funds from tax.
The tax collection has been very weak, according to Abraham. He stressed that the tax collection has to be closely followed for better performance.
The budget documents indicated that for the coming budget year the tax collection will be 211 billion birr. The external assistance and external loans are 19 billion and 32.7 billion birr respectively, while the balance is coming from different government investment and other incomes. The budget deficit is 2.3 percent of the GDP or 59.3 billion birr.
The capital budget for the federal government is 133.6 billion birr, which a reduction of 4.4 percent compared with the preceding year or over one billion birr. The capital budget reduction is an extraordinary situation for the sector since in the past it showed significant growth compared with the preceding year. The subsidy appropriation to regions has stood at 135.6 billion birr which is a  15.7 percent increase  compared with the preceding year and it is the 39 percent of the total budget, while the recurrent budget is 91.7 billion birr.