ADDIS ABABA, June 11 – Ethiopia’s government plans to increase public spending significantly in the 2026/27 fiscal year, with additional expenditures linked to the ongoing Middle East crisis expected to drive much of the increase.
Presenting the budget to lawmakers on Thursday, Minister of Finance Ahmed Shide said total government spending is projected to rise to approximately 2.34 trillion birr ($14.7 billion) in the fiscal year beginning next month, up from 1.92 trillion birr in the current fiscal year.
According to the finance minister, the increase largely reflects the economic impact of developments in the Middle East.
“This increase mostly takes into account expenses related to the Middle East crisis,” Shide told parliament.
While the minister did not provide a detailed breakdown of the additional costs, Ethiopia has expanded fuel subsidy support since the conflict began as authorities seek to cushion consumers and businesses from rising energy prices.
Despite the higher expenditure plans, the government expects fiscal pressures to remain manageable.
The budget deficit is projected at 1.4% of gross domestic product (GDP) in the next fiscal year, lower than the 2.2% deficit forecast for the current fiscal year.
The fiscal projections reflect the government’s confidence in the country’s economic performance and revenue outlook.
Ethiopia is forecasting economic growth of 10.1% in 2026/27, broadly in line with growth expectations for the current year and among the strongest growth rates on the continent.
The government also highlighted continued progress in export performance.
According to Shide, Ethiopia generated $8.7 billion in export revenue during the first ten months of the current fiscal year and expects total export earnings to reach $10.5 billion by year-end.
Export revenues remain closely watched by investors and creditors as Ethiopia continues efforts to restructure portions of its external debt.
The country has been engaged in negotiations with holders of its $1 billion Eurobond as part of a broader debt restructuring process under the G20 Common Framework.
Those discussions encountered another setback last month after bondholders rejected Ethiopia’s latest restructuring proposal, with some creditors indicating they may pursue legal action.
Nevertheless, the finance minister suggested progress is still being made in discussions with creditors.
“Debt restructuring negotiations, including with Eurobond creditors, are currently underway, and we are close to reaching an agreement with some of them,” Shide said.
The government’s latest budget projections suggest Ethiopia is seeking to balance higher spending requirements with fiscal discipline while maintaining growth momentum and advancing efforts to restore debt sustainability.
