Ethiopia’s economy is expected to expand more swiftly in the fiscal year to July 2023 but the budget deficit will rise, Finance Minister Ahmed Shide told parliament on Tuesday.
The nation of 115 million has been one of the world’s fastest-growing economies in the past 15 years, boosted by heavy infrastructure investment, but the COVID-19 pandemic and a conflict that has now subsided slowed expansion in the past two years or so.
Ahmed said in a budget speech that the economy was expected to grow by 6% to 7% in the 2021/22 fiscal year, down from a previous forecast of 8.7%, and by 9.2% in 2022/23.
Last week, the cabinet approved total spending for 2022/23 of 786.6 billion birr ($15.2 billion), a 16.6% rise from the previous year.
Ahmed said the budget was forecast to record a deficit in 2022/23 of 231.4 billion birr, or 3.4% of gross domestic product compared with a government predicted deficit of 2.7% in 2021/22.
To plug the deficit, the government would borrow 224.5 billion birr domestically and the rest from external sources, Ahmed said.
“This budget deficit is higher than previous years and that is due to the current condition of our country where covering essential expenses is a must,” he said, without elaborating.
Fighting erupted in Ethiopia’s northern Tigray region in November 2020, extending to neighboring regions last year, hitting state economic programs and deterring foreign investors. The federal government declared a unilateral humanitarian ceasefire in March.
Some spending would be used on rebuilding infrastructure and services damaged in the conflict, Ahmed said.
($1 = 51.6684 birr) (Reporting by Dawit Endeshaw Writing by George Obulutsa Editing by James Macharia Chege and Edmund Blair)