By Benadeta Mwaura - Reporter
Ethiopia, June 30, 2026 - Ethiopia has unveiled its largest federal budget in history, proposing a 2.339 trillion birr (approximately $17 billion) spending plan for the 2019 Ethiopian Fiscal Year (2026/27), with the government pledging to protect low-income households, sustain economic reforms and accelerate long-term growth.
Finance Minister Ahmed Shide presented the draft budget to the House of People's Representatives on Monday, describing it as a fiscal roadmap designed to consolidate gains made under Ethiopia's Homegrown Economic Reform Programme while cushioning citizens from the rising cost of living.
"The budget has been prepared with special consideration for low-income segments of society and is expected to have a positive impact on the livelihoods of Ethiopian families," Ahmed told lawmakers.
The record budget represents an increase of nearly 32%from the previous fiscal year's allocation of 1.78 trillion birr, reflecting the government's expanding fiscal ambitions as it pursues economic modernization, infrastructure development and debt management following major reforms launched in 2024.
Ahmed said the budget combines targeted social spending with fiscal discipline to support vulnerable households while addressing macroeconomic challenges such as inflation and public debt.
"The budget incorporates targeted subsidies for key social expenditures to cushion vulnerable households and strengthen social protection," he said.
The minister added that the spending plan is aligned with Ethiopia's Ten-Year Development Plan and the Homegrown Economic Reform Agenda, which have underpinned recent policy changes including the liberalization of the foreign exchange market, modernization of monetary policy and efforts to improve the investment climate.
The government expects Ethiopia's economy to maintain one of Africa's fastest growth rates despite global economic uncertainty.
Ahmed told Parliament the economy is projected to expand by 10.1% during the upcoming fiscal year after recording an estimated 10.2% growth in the current fiscal year. Between the 2018/19 and 2023/24 fiscal years, Ethiopia posted an average annual growth rate of 6.8%, with growth accelerating to 9.2% in 2024/25 as reforms gathered pace.
The projections broadly align with recent assessments by the International Monetary Fund (IMF), which expects Ethiopia to remain among the continent's fastest-growing economies following the implementation of macroeconomic reforms supported by the IMF and the World Bank.
The proposed budget prioritizes both recurrent government operations and long-term investments intended to sustain economic transformation.
Under the spending plan:
1.24 trillion birr (about $9 billion) has been allocated for recurrent expenditure, accounting for 52.9 percent of the total budget. This will finance debt servicing, public sector salaries, fertilizer and petroleum subsidies, and the delivery of essential government services.
568.2 billion birr (approximately $4.1 billion) has been earmarked for capital expenditure to finance roads, energy projects, industrial parks, irrigation schemes and other infrastructure investments.
520.6 billion birr (around $3.8 billion) will be transferred to Ethiopia's regional states and two city administrations to finance education, healthcare, agriculture and local development programmes.
An additional 14 billion birr (approximately $101 million) has been allocated to support regional Sustainable Development Goal (SDG) initiatives aimed at improving access to basic services and reducing regional disparities.
The budget also provides significant funding for priority sectors including education, healthcare, agriculture, industrial development, transport infrastructure and energy, reflecting the government's strategy of using public investment to stimulate private-sector-led growth.
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Containing inflation remains one of the government's key priorities after consumer prices surged in recent years due to foreign exchange shortages, supply chain disruptions and global commodity shocks.
Ahmed said fiscal policy will continue balancing growth with social welfare by maintaining subsidies for strategic sectors while strengthening social safety nets for vulnerable households.
"Our fiscal policy will continue to balance economic growth with social welfare, ensuring that investments support both long-term development and the immediate needs of citizens," the minister said.
The government also plans to strengthen domestic revenue collection by broadening the tax base and improving tax administration to reduce reliance on borrowing over the medium term.
The new budget comes less than two years after Ethiopia launched one of its most ambitious economic reform programmes in decades.
Since mid-2024, authorities have implemented a market-based foreign exchange regime, eased currency controls, modernized monetary policy and introduced reforms aimed at attracting foreign investment. The measures formed part of a broader agreement with the IMF and the World Bank to stabilize the economy, improve debt sustainability and restore macroeconomic stability.
Earlier this week, Ethiopia also reached a preliminary agreement with official creditors to restructure its $1 billion Eurobond, a key milestone in the country's debt restructuring process under the G20 Common Framework. The agreement is expected to ease debt servicing pressures and create additional fiscal space for development spending.
Ahmed reaffirmed Ethiopia's commitment to maintaining strong relationships with international development partners while safeguarding national policy independence.
"Our partnerships with international allies will continue to strengthen in the coming years while preserving our country's policy independence," he said. "We will pursue only those partnerships that contribute to economic stability and improve the well-being of our people."
The remarks come as Ethiopia deepens cooperation with multilateral lenders, bilateral development partners and private investors to finance infrastructure, agriculture, manufacturing and digital transformation projects.
Economists say the record budget reflects Ethiopia's attempt to strike a careful balance between sustaining economic growth, expanding social protection and maintaining fiscal discipline.
While the ambitious spending plan is expected to accelerate infrastructure development and support vulnerable households, analysts note that its success will depend on continued improvements in domestic revenue mobilization, effective implementation of reforms and sustained macroeconomic stability.
With double-digit growth forecasts, a recovering investment climate and progress on debt restructuring, the 2026/27 budget signals the government's determination to translate ongoing reforms into inclusive economic growth while shielding millions of Ethiopians from the effects of inflation and rising living costs.