Ethiopia has announced a substantial increase in its revenue target as part of a reform-driven agreement with the International Monetary Fund (IMF).
The government has set its sights on generating 1.5 trillion birr ($12.5 billion) for the fiscal year ending July 7, significantly exceeding the initial finance ministry budget of 613 billion birr set earlier this year.
The push to meet this new target has led to the introduction of several new taxes, including a value-added tax (VAT) on banking services, property taxes, and an excise tax on telecommunications.
While the country saw a 65% increase in revenue in the first quarter, raising 180 billion birr, the current pace indicates more rigorous efforts are needed to reach the ambitious year-end goal.
Prime Minister Abiy Ahmed underscored the nation’s commitment to restructuring during a session with lawmakers.
Ethiopia’s economic landscape has faced heightened challenges in recent years, grappling with the financial impacts of COVID-19 and a two-year civil conflict, which concluded in November 2022.
The ongoing economic strain led Ethiopia to become the third African economy to default on its government debt in December 2023, just months before securing a $3.4 billion bailout package from the IMF in July.
One key reform under the IMF agreement involves the decision to allow the Ethiopian birr to float freely, a bold move intended to stabilize the economy.
In addition, Ethiopia is working to modernize its financial sector by inviting foreign investors and advancing plans to privatize state-owned enterprises, including the nation’s largest telecommunications provider.
Prime Minister Abiy addressed the country’s historically low tax collection rates, attributing it partly to widespread informality in the economy.
“We want to change this,” he stated in Addis Ababa, emphasizing Ethiopia’s drive to reform tax laws, improve tax administration, and automate processes.
He also noted the government’s focus on changing the attitudes of tax workers to foster greater efficiency.
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