Finance Minister Ahmed Shide Pushes for Stronger Tax Collection to Fund Record Budget

At a recent session in the House of Peoples’ Representatives, Finance Minister Ahmed Shide reaffirmed the government’s firm position that spending must be contained within the country’s revenue capacity. Addressing questions from parliamentarians on the draft federal budget for the 2025/2026 Ethiopian fiscal year, the minister emphasized the need to balance ambitious expenditure plans with realistic revenue projections.

The proposed budget, totaling ETB 1.93 trillion, reflects a significant allocation toward recurrent spending, which accounts for the largest portion of expenditures. Minister Shide explained that while recurrent costs have risen, particularly due to debt servicing and social service obligations such as salaries and essential programs, the government remains committed to maintaining fiscal discipline and gradually improving capital investments.

Lawmakers expressed concern over the growing share of recurrent expenditures relative to capital spending, questioning how this shift might affect Ethiopia’s long-term economic growth and development goals. In response, the minister acknowledged these challenges but stressed that meeting recurrent obligations remains necessary to sustain the government’s functions and social commitments.

During the discussion, the minister also addressed ongoing tax reforms. He highlighted that the government is actively revising tax laws to enhance collection and ensure fairness, but he acknowledged that previous adjustments have already impacted households and businesses, raising legitimate concerns among the public.

Questions about the value-added tax on fuel also surfaced, with some parliamentarians asking whether the VAT diminishes the effect of fuel subsidies intended to ease consumer costs. Ahmed responded that subsidies need to be implemented in a targeted and fiscally sustainable manner, hinting at potential future reviews of subsidy and tax policies.