Ethiopia is on the verge of a significant transformation in its health sector funding, as highlighted in a World Bank report. The proposed plan aims to increase government spending, drastically reduce out-of-pocket costs for patients, and enhance domestic drug production. This will be supported by raising health taxes on sodas, alcohol, and tobacco.
The recently published ‘National Health Compact’ forecasts that total health expenditure in Ethiopia will rise by over 72%, reaching $8.3 billion by 2030, up from $4.8 billion in 2024.
The most notable change will come from the funding sources. The government’s share of health financing is expected to double, increasing from 27% in 2023 to 53% by 2030. This growth will be driven by a higher budget allocation-targeting 10% of total government spending-and improved domestic resource mobilization.
According to the report, “This expansion will be fueled primarily by increased government expenditure, supported by the expansion of health-related taxes and the exploration of debt-swaps for health.”
At the same time, the financial burden on citizens will significantly diminish. Out-of-pocket (OOP) expenditures, a major barrier to healthcare access, are projected to decrease from 39% of total health spending in 2024 to 20% by 2030. External funding is also expected to drop as domestic financing increases, falling from 31% to 15% during this period. Contributions from health insurance are anticipated to rise gradually.
In alignment with the World Bank Group’s Africa Initiative for Medical Access and Manufacturing (AIM 2030), the Compact sets an ambitious goal for domestic self-reliance. It aims to boost local production of essential medicines and health commodities from covering 15% to 50% of national demand by 2030. This initiative seeks to lessen import reliance, create skilled jobs, and engage with the broader African pharmaceutical market.
A related analysis indicates that with effective reforms, Ethiopia could meet 75% of its essential medicines demand within a decade. This could lead to increased pharmaceutical exports, boost annual GDP by up to $650 million, and create over 50,000 jobs.
To promote equity, the strategy advocates for expanding targeted “sin taxes” on tobacco, alcohol, and sugary beverages. A portion of this revenue would be designated to subsidize Community-Based Health Insurance (CBHI) for low-income and vulnerable populations, aiming to increase coverage from 50% to 75% by 2030.
The Compact aims to accelerate Ethiopia’s Health Care Financing Strategy for 2022-2031. Beyond raising funds, it emphasizes more effective utilization of those resources. Key initiatives include Public Financial Management reforms and an ambitious digitalization push, with the goal of digitizing 83% of district-level primary healthcare service delivery to achieve at least 20% efficiency gains.
The primary objectives are to direct resources toward quality primary healthcare, reaching an additional 47 million people, and to mobilize at least $250 million in private sector investment for the health sector by 2030.
If successfully executed, these interconnected reforms promise to not only change how Ethiopia finances healthcare but also to establish a more sustainable, equitable, and self-reliant health system for the next decade.
The document notes that through effective implementation of ongoing reforms, market-shaping mechanisms, and strategic partnerships, Ethiopia could potentially meet 75% of its essential medicines demand and 50% of its total pharmaceutical needs within the next ten years.
“This would increase the pharmaceutical sector’s share of exports from 2% to 20%, generate an estimated US$550-650 million in annual GDP, create over 50,000 jobs, and tap into the broader African pharmaceutical market,” the document released last month stated.
