In a move that averted a potentially catastrophic fuel crisis, the Ethiopian government has taken corrective action to address the country’s mounting fuel-related debt. The crisis was looming large as the lack of fuel price revisions over the past few years had depleted the funds in the price stabilization program, leading the Ethiopian Petroleum and Energy Authority (EEA) to accumulate over 197 billion birr in debt.
“If the government had not taken immediate corrective action, the country would have reached a point where it would not be able to import fuel due to debt,” said Bekelech Kuma, the Public Relations and Communications Director of the EEA.
The price stabilization fund, which is meant to cushion the impact of global oil price fluctuations, had run dry, recording losses of up to 15 billion birr per month as the debt began to mount. This posed a grave threat to the country’s fuel supply, as the EEA had exhausted its deposits for fuel purchases and was drowning in debt.
To address the crisis, the government implemented a fuel reform program in July 2022, which excluded over 1 million vehicles in urban hubs and cross-country public transport from the fuel subsidy package. This measure reduced the debt burden on the stabilization fund from 197 billion birr to 89 billion birr, with the debt set to continue decreasing as the government revises fuel prices.
“As fuel prices did not recover, the reserve on the fuel stabilization fund ran out and debt began to register,” Kuma explained. “By changing this practice, the price stabilization fund has been able to reduce its debt burden, and the debt will continue to decrease as it is revised.”
The fuel reform has also seen the integration of digital payment systems, with 1,580 petrol stations registering 1,535 Telebirr accounts and 1,453 starting transactions.
The government’s decisive action has not only prevented a fuel import crisis but also set the stage for a more sustainable and efficient fuel management system in the country. As Ethiopia looks to the future, the lessons learned from this experience will undoubtedly inform its energy policies and ensure the country’s energy security.
