Ethiopia has raised its revenue goals as part of its agreement with the International Monetary Fund, which includes specific conditions to reform the region’s largest economy.
Prime Minister Abiy Ahmed revealed to lawmakers that the East African country has set an ambitious revenue goal of 1.5 trillion birr ($12.5 billion) for the fiscal year ending July 7, Bloomberg reported. This figure surpasses the finance ministry’s initial budget of 613 billion birr for 2024-25, presented in June.
However, to reach this target, the government has introduced several new taxes, including a value-added tax on banking services, property taxes, and an excise tax on telecommunication services.
Despite a promising start with a 65% increase in revenue collection in the first quarter, bringing in 180 billion birr, the amount still falls short of the elevated annual target.
Ethiopia has been contending with increased financial difficulties arising from the effects of the COVID-19 pandemic and a two-year civil war that ended in November 2022. Last December, the country became the third economy on the continent to default on its government debt.
In response, the country secured a $3.4 billion bailout from the International Monetary Fund (IMF) in July, following its default on a eurobond due this December. As part of the agreement, Ethiopia had to let its currency float freely, a major shift aimed at stabilizing its economy.
Additional reforms include opening up its financial sector to foreign investors and advancing plans to privatize state-owned enterprises, with its largest telecommunications company among the assets slated for privatization. These measures signal Ethiopia’s commitment to economic restructuring as it navigates its fiscal challenges.
“Ethiopia is one of the countries with a low tax-collection rate, largely because many sectors operate informally. We want to change this. We are working on reforming tax laws, improving tax administration, automating processes and changing the attitudes of tax workers,” Abiy said in the capital, Addis Ababa.
