Prime Minister Abiy Ahmed announced that the nation is nearing the completion of talks with development partners that would enable it to secure an additional USD 10.5 billion in funding in the coming years.

Abiy stated that the proposed budget of 971.2 billion birr for the 2024/25 fiscal year, which begins today, is insufficient to meet the country’s development needs. He made this statement while appearing in parliament on Thursday, July 5, to defend his government’s budget proposal and address questions from lawmakers.

The prime minister emphasized that the majority of the budget is intended for social development initiatives, development projects, and poverty alleviation. However, the amount is not enough, and the deficit cannot exceed the projected amount.

The budget deficit for this year is 358.5 billion birr, or 2.1 percent of the GDP.

Abiy mentioned that the budget would be revised if additional funding is obtained through agreements reached in negotiations with the government’s foreign allies, the World Bank and the International Monetary Fund, regarding the reform program.

According to the prime minister, the negotiations have taken a long time due to the firm positions taken by both parties. He stated that over the past five years, several negotiations have been conducted within the framework of the reform agenda.

“It took five years to implement the reform agenda due to strong opposition from both parties. It seems that most of our requests are now being accepted with the help of our partner countries,” he added.

If the talks are successful, Ethiopia will receive an additional USD 10.5 billion in the coming years. “Therefore, the budget will be reviewed considering this new funding,” Abiy stated.

The prime minister explained that the difficulty in securing the funds arises from the government’s desire to immediately pursue certain reform agenda items, while other areas are to be implemented gradually.

“If our demands are accepted and we agree with our partners to secure the funds, we will revise the budget,” said the PM.

During his budget address, Finance Minister Ahmed Shide expressed optimism that the negotiations will soon come to an end. He emphasized that the discussions must conclude.

While partners, especially bilateral financiers, are pressuring the government to finalize negotiations on the reform agenda with international organizations, Ethiopia is seeking external financial assistance and debt restructuring from key financiers.

International partners expect significant fiscal and macroeconomic reforms from the administration, including increased tax collection and expansion of the tax base.

According to sources cited by Capital, most of the negotiations with partners have been concluded, with a few key areas remaining.

“For instance, the two sides have agreed on the liberalization of the financial sector and the reform of the state-owned Commercial Bank of Ethiopia (CBE),” the sources said.

Experts argue that the stability of the bank is affected by the large amount of credit that CBE provides to state-owned enterprises, noting that “this is one of the key areas where foreign partners have demanded significant reforms.”

Nevertheless, one of the reasons for the lack of consensus is the floating of the birr, even though concerns about potential devaluation have been discussed in recent weeks.

According to Abiy, the reform plan will bring significant changes to the economy, particularly by reducing the amount of debt, “but compromises on terms and conditions are required from both parties.”

“We have allocated the funds according to our resources until we reach an agreement,” he explained regarding the budget approved on the same day.

According to him, the economy has improved significantly over the past several years, with the GDP now standing at USD 205 billion.