Addis Abeba — The Council of Ministers has authorized a substantial supplementary budget of 581.98 billion birr for the current fiscal year, bringing the total budget for the 2024/25 fiscal year to over 1.5 trillion birr.
According to a statement issued by the Office of the Prime Minister, the Council of Ministers convened on 21 November, 2024, to deliberate on the federal government's supplementary budget and expenditure adjustment draft proclamation.
The statement revealed that the supplementary budget and expenditure adjustments were revised to account for the government's financial capacity, projected revenues, and additional budgetary and expenditure estimates.
Following the discussion of the supplementary budget and expenditure adjustment draft proclamation, the Council of Ministers approved the proposal and forwarded it to the House of Peoples' Representatives for final endorsement.
The Council of Ministers' approval of the supplementary budget comes five months after the House of People's Representatives endorsed a nearly one trillion birr budget for the current fiscal year.
In early July 2024, the parliament approved 971.2 billion birr for 2024/25, a 21% increase from the previous year.
A macroeconomist, speaking to Addis Standard on the condition of anonymity, highlighted the timing of the supplementary budget approval. He noted that such approvals often coincide with the conclusion of the first half of the fiscal year, when the government faces a shortage of funds to cover its expenditures.
"Typically, requests for additional budget from the government emerge in December or January," the expert noted. "This pattern is generally observed in normal years, absent extraordinary circumstances that necessitate additional funding."
The macroeconomist also drew attention to the substantial size of the government's supplementary budget request, which amounts to 56% of the original budget approved by the legislature for the entire fiscal year.
"Compared to previous supplementary budget requests, the current one represents a significant increase," he noted.
As an example, he cited the 2021/22 fiscal year, during which the supplementary budget amounted to 122 billion birr--representing 21.7% of the 561.67 billion birr original budget approved by parliament for the year.
The supplementary budget and expenditure adjustment, as outlined in the statement issued by the Office of the Prime Minister, were formulated to align with the revised medium-term macroeconomic and fiscal framework, designed to "enhance the government's financial capacity and secure necessary revenues."
Yesterday, the Council of Ministers also deliberated on the medium-term (2024-2028) macroeconomic and fiscal framework.
"This framework constitutes the foundation for implementing macroeconomic reforms and fiscal policy adjustments aimed at bolstering the country's economic recovery under the second phase of the Homegrown Economic Reform agenda," the statement reads.
It further elaborates that the medium-term framework has been "refined and updated" in alignment with the macroeconomic reforms introduced in late July 2024.
Introduced on 28 July, 2024, the macroeconomic reforms aim to address long-standing economic distortions by transitioning from a crawling peg exchange rate system to a market-based foreign currency regime.
The macroeconomist suggested that the additional budget request may be linked to the financial implications of these reforms, particularly the need to adjust civil servant salaries.
"Although the government accounted for the salary adjustment when preparing this year's budget in July, recent comments by officials, along with the incomplete implementation of salary increases for all civil servants, suggest that additional funding might be necessary," he remarked.
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In early September 2024, the Ministry of Finance submitted a proposal to the Council of Ministers requesting an additional 91.4 billion birr to fund a salary increase of up to 332% for approximately 2.4 million public servants.
Finance Minister Ahmed Shide explained in a recent press briefing that the salary adjustment for government employees became necessary following the macroeconomic reforms, which are "expected to place additional financial strain on fixed- and low-income earners."
"The salary adjustment aims to mitigate the rising cost of living for civil servants," he noted.
However, Addis Standard reported last week that despite an announcement by the Civil Service Commission regarding salary increases in October payments, many federal employees and Addis Abeba municipality workers have yet to see the adjustment reflected in their salaries.
