Contrary to expectations that the recent macroeconomic reforms would stimulate growth, Ethiopia’s export sector—excluding a few specific goods—is currently underperforming. This shortfall was a central topic in a high-level, closed-door meeting convened on Saturday, March 7, by the Ministry of Trade and Regional Integration (MoTRI).
The meeting was called to address concerns raised by the Ministry of Revenue (MoR) regarding the impact of newly implemented tax regulations on exporters, who report that the measures are straining their financial operations.
The gathering brought together MoTRI leadership and exporters, primarily those operating within the ministry’s direct oversight. While commodities such as coffee and gold fall under the purview of other regulatory bodies, MoTRI is responsible for shepherding the export of pulses and oilseeds, a sector that has historically been a significant contributor to Ethiopia’s commodity export revenues.
A primary point of contention raised by exporters was the implementation of the Minimum Alternative Tax (MAT), introduced in the previous budget year. As stipulated in Article 23 of Proclamation No. 1395/2024, taxpayers are required to pay a minimum tax if their total assessable business income for a year results in a tax liability below 2.5 percent of their annual turnover.
Exporters argue that while their business involves high transaction volumes, their net profit margins remain low. Consequently, they perceive the MAT as a disproportionate burden. “The turnover is significant, but our earnings are not,” one exporter explained. “The MAT poses a substantial risk to our business because it is based on revenue rather than actual profit.”
Further compounding their financial challenges is the mandate for Category A and B taxpayers to make quarterly advance income tax payments. These payments, equivalent to 25 percent of the prior year’s tax liability and due within 30 days of each quarter, are severely impacting their working capital and liquidity, according to industry representatives.
During the discussion, MoTRI officials reportedly suggested that the Ethiopian Pulses and Oilseeds Exporters Association (EPOSEA) prepare a simplified, data-driven analysis of the tax’s impact. Such a document, it was noted, would facilitate more productive negotiations with the Ministry of Revenue.
However, participants expressed dissatisfaction with the overall tone of the engagement. One attendee remarked, “Rather than fostering a collaborative approach to problem-solving, the demeanor from some ministry officials was perceived as adversarial. We had hoped for a partnership, similar to the government-business relationships seen in market-driven economies, but instead encountered mistrust.”
Beyond taxation, the meeting also addressed critical logistical and market-related barriers hindering export performance. Exporters highlighted the lack of adequate security and infrastructure at key collection points for premium sesame seeds, which is leading to losses.
Transportation bottlenecks, exacerbated by domestic fuel shortages, are driving up costs. This makes the Free on Board (FoB) price of Ethiopian goods in Djibouti less competitive on the global market. Compounding these issues is an oversupply in international markets. Exporters contend that a global production surplus has driven prices down, yet the government’s indicative pricing has not adjusted accordingly, leaving Ethiopian goods priced out of the market.
“The primary reason for the poor performance is a global market that is overstocked,” a participant stated. “This situation requires the government’s cooperation to accelerate the movement of goods, rather than exerting pressure on exporters. A rigid indicative price is counterproductive; the ministry needs to understand and accommodate contract prices based on current market realities. Furthermore, products like pulses have a limited shelf life and must be exported promptly to maintain quality.”
Despite these headwinds, the export sector under MoTRI’s purview has recorded mixed results. In the first seven months of the current fiscal year, the ministry achieved 87 percent of its revenue target, generating USD 440 million from its portfolio.
A closer look at the data reveals that pulse exports have reached 95 percent of their objective, while oilseeds, another critical hard currency earner, are lagging at 66 percent of their target. Exporters and ministry officials alike acknowledge that without addressing the intertwined issues of tax policy, logistics, and global market dynamics, the sector will struggle to realize its full potential.
During the seven months of the budget year ending on July 7, 2026, the country recorded export earnings of USD 5.9 billion. This marks a 17 percent increase compared to the same period last year and surpasses the target by 117 percent.
The mining sector contributed the largest share, accounting for 53 percent of total earnings with USD 3.14 billion. Coffee followed, generating USD 1.47 billion and representing 25 percent of the total. Other promising sectors also showed strong performance, with industry and electricity contributing USD 259 million and USD 279 million respectively, together accounting for nine percent of commodity export earnings. Exports regulated by MoTRI made up 7.4 percent of the total.
The macroeconomic reforms introduced in July 2024 have been cited as a key factor behind the growth in export earnings. Sectors such as minerals—particularly gold—along with industrial products and coffee, have performed notably well. However, oil seeds and pulses have shown no improvement, either in value or volume.
