The federal auditor has uncovered severe contract violations, weak oversight and major financial waste in two large irrigation projects under the Ministry of Irrigation and Lowlands, with illegal price adjustments and additional expenses totaling 3.69 billion birr.

In a performance audit covering the ministry’s operations from 2018 to 2025, the Office of the Federal Auditor General said the Welmel and Chelchel irrigation projects were plagued by repeated contract amendments, unjustified variation orders and budget overruns that directly violated contract clauses stating that no price adjustments would be made.

The audit found that some construction lots recorded budget inflation of up to 168.64 percent, while consultancy contracts rose by as much as 276.84 percent. It said the projects were delayed by more than 38 months because of poor pre-construction planning, weak design work, ineffective monitoring, poor decision-making and capacity limitations among contractors and consultants.

Despite the delays, the ministry did not impose liquidated damages on the contractors as required under the contracts. The auditor also said the ministry lacked a standardized system to assess contractor and consultant performance in terms of cost, quality and time, leaving it unable to take corrective action.

The report said public funds were also diverted to purchases that were not part of the original contracts. In the Chelchel irrigation project, more than 132 million birr was used to buy luxury vehicles through a contract amendment. These included a 2023 V6 model valued at more than 49 million birr, including a 10 percent contractor profit margin, and two 2023 Toyota Prado vehicles valued at 83 million birr. Although these vehicles were justified as being for technical monitoring services, they were left with the contractor.

On another part of the Chelchel project, 75 million birr was spent on seven field vehicles that were not in the original contract. The auditor said the transaction was processed through a fraudulent interim payment certificate that presented the purchase as completed construction work, generating an additional 6 million birr in profit and service fees for the contractor.

The report further said both mega-projects bypassed mandatory legal safeguards, including environmental and social impact assessments and permits from the Environmental Protection Authority.

The Chelchel rock-fill dam project, located in Bale Zone between Rayitu and Ginir woredas, was designed to irrigate 4,145 hectares of land and support more than 9,000 farmers. After the contract with the Defense Construction Enterprise was terminated in 2021/22, the project was re-awarded to Alemayehu Ketema Contractor. By June 2025, spending had reached more than 1.16 billion birr for Lot 1, 1.12 billion birr for Lot 2 and 114 million birr for consultancy services.

The Welmel River diversion and main canal project, located in Delo Mena and Harena Buluk woredas, was intended to irrigate 12,040 hectares of land. Initially awarded in 2018/19 to Alemayehu Ketema Contractor and Oromia Construction Corporation for a total of 2.9 billion birr, the project’s budget expanded sharply under the claim of unforeseen design challenges. By 2025, the government had spent more than 2.4 billion birr on Lot 1, 2.3 billion birr on Lot 2 and 164 million birr on consultancy services, yet progress remained limited.

OFAG blamed institutional governance failure for the spending spree, saying the ministry began highly complex, capital-intensive projects without a modern irrigation policy, a comprehensive strategy or a standardized quality control manual.

The auditor also said the feasibility studies and engineering designs for both projects were never subjected to rigorous review or formal approval by an independent technical body, allowing billions of birr in public money to be managed without a proper regulatory framework.

It warned that if the ministry fails to comply with corrective measures, the matter could be referred to the House of Peoples’ Representatives for legal and criminal accountability.

Anbesa Bank shareholders and senior leadership have intensified efforts to resolve an escalating governance dispute with the National Bank of Ethiopia (NBE), after the central bank reaffirmed its decision to invalidate the bank’s board election and proceed with a fresh vote next month.

The latest development follows a high-level meeting held on Thursday between Anbesa Bank’s leadership and NBE Governor Eyob Tekalign. According to sources familiar with the discussions, the governor remained unconvinced by the bank’s arguments and declined to reverse the regulator’s earlier decision. As a result, the extraordinary general meeting ordered by the NBE will proceed as scheduled on August 8 to elect a new board of directors.

The dispute began after the central bank withdrew a letter it had issued on June 8 to the Documents Authentication and Registration Service (DARS), confirming the validity of the minutes of Anbesa Bank’s 21st General Assembly, held in October 2025.

In a revised directive dated June 19, the NBE endorsed all resolutions adopted at the general assembly except those concerning the election of the board of directors. It instructed DARS to register the remaining resolutions while excluding the board election.

Anbesa Bank subsequently appealed the decision, asking the regulator to reconsider its position. However, in a July 1 letter, the NBE rejected the appeal and instructed the bank to organize another shareholders’ meeting to conduct a fresh board election.

The regulator’s stance has triggered concern among shareholders. Sources told Capital that investors representing roughly 35 percent of the bank’s paid-up capital submitted a petition on July 4 requesting a direct meeting with Governor Eyob to seek clarification on the decision and discuss the governance challenges facing the bank.

According to the sources, many shareholders believe the central bank may have received an inaccurate picture of the board’s internal dynamics.

“They appear to have been told that the board is fundamentally divided,” one source said. “Differences of opinion are common in any boardroom and are an essential part of sound corporate governance, especially when decisions involve the bank’s long-term financial interests.”

However, insiders claim the disagreement extends beyond routine governance matters and is linked to broader political and commercial interests connected to Tigray.

They noted that Anbesa Bank has significant lending exposure in the region, where many businesses suffered severe financial setbacks following the conflict that erupted in northern Ethiopia in late 2020.

According to the sources, the bank currently carries nearly 12 billion birr in non-performing loans, a considerable share of which is tied to borrowers in Tigray, including companies associated with EFFORT, the business conglomerate historically linked to the TPLF.

At the center of the dispute, sources said, is whether the bank should approve additional credit facilities and foreign exchange allocations for companies that already have substantial unpaid obligations.

“Some members of the board have advocated for extending new loans and forex allocations to clients with large outstanding debts,” one source explained. “The majority has resisted those proposals, arguing that doing so would contradict prudent banking standards and regulatory requirements.”

The current board leadership maintains that its responsibility is to protect the bank’s financial health while ensuring full compliance with banking regulations.

“They have refused to authorize additional financing for heavily indebted borrowers,” the source added. “That has led to efforts by another group to replace the existing board with directors who would be more accommodating to those interests.”

Separately, Board Chairman Alem Asfaw formally sought a meeting with the NBE governor to present the board’s position and request further clarification on the regulator’s decision.

Despite nullifying the board election, the central bank upheld the general assembly’s decision to increase the bank’s capital after what sources described as an extensive verification process. The approval enabled Anbesa Bank to raise its paid-up capital to more than six billion birr, surpassing the five-billion-birr minimum capital threshold that commercial banks were required to meet by June 30, 2026.

With the governor declining to reconsider the regulator’s position during Thursday’s meeting, attention has now shifted to the August 8 extraordinary general meeting, where shareholders are expected to elect a new board in accordance with the NBE’s directive.