Ethiopia Economy Projected to Grow 9% in 2019/20 FY

By Sisay Sahlu

ADDIS ABABA – Ministry of finance has projected Ethiopia‘s economy to expand by 9 percent in 2019/20 fiscal year.

The latest project downsizes the government’s previous double-digit growth projection in its five-year development plan, Growth and Transformation Plan II.

It is, however, higher than the projection made by the International Monetary Fund, which indicates the country’s growth for 2019 to be 7.7% in April.

“The growth will gain momentum next year and will grow by 9%” in 2019/2020, finance minister Ahmed Shide told lawmakers on Tuesday as he presented plans to raise spending.

Budget increases

The minister presented the 2019/20 FY budget bill for approval and explained in detail the budget allocation.

The minister proposed 386.9 billion Br. (13.5 billion USD) in government spending for 2019/2020, which if approved will be 12% higher than 2018/19’s budget, which is 346.9 billion Br.

The budget bill indicates that 130.7 billion Br allocated for capital expenditure and 109.5 billion Br for recurrent spending.

Over 140 billion Br will also be allotted for regional block grants while the remaining six billion Birr going to projects under the Sustainable Development Goals (SDG).

In his budget speech, Ahmed said the budget takes the current economic reform into account and targets the economic growth to regain its momentum.

Tackling Inflation a Priority

The minister also said the government will aggressively work on shrinking the current double-digit inflation rate to 9.6 percent.

The latest consumer price index of statistics agency claims headline inflation, the indicator of the cost of living, hit an 11-month high of 16.2 percent in May.

Ahmed said the government will give much emphasis to stabilizing inflation rate and tackle its growth to a single digit.

“We are following the trend carefully and also work with great attention on this subject,” he said. “The budget formulation process has also taken the trend into consideration”.

– Irrigation to get more Fund–

Unlike the 2018/2019 FY, the proposed budget gives more emphasis for modern irrigation as well as finance unfinished road projects in various parts of the country.

The budget for irrigation is expected to double next fiscal year from the current 7 billion birr to over 14 billion Br.

During the upcoming fiscal year, Ahmed said the government will focus on easing country’s loan burden, installing sustainable financing model, increase the role private investment and modernizing the agriculture sector.

The lawmakers, after deliberating on the bill, directed the draft budget to revenue, budget and finance affairs standing committee of the parliament further hearing.

They are expected to approve the plans over the next few weeks.