Ethiopia is projected to lose approximately USD 5 million in customs revenue during the first year of implementing the African Continental Free Trade Area (AfCFTA) agreement, according to the Ethiopian Policy Studies Institute.

The projection was disclosed as part of the finalization of Ethiopia’s National AfCFTA Implementation Strategy, which outlines the country’s roadmap for integrating into the continent-wide free trade pact. The strategy was officially launched during a public consultation forum held in Addis Ababa on June 20, 2025.

The high-level event brought together senior government officials, private sector leaders, and development partners. Among the key attendees were Dr. Kassahun Goffe, Minister of Trade and Regional Integration; Yasmin Wohabrebi, State Minister for Trade and Regional Integration; and Dr. Abebe Ambachew, Senior Researcher at the Policy Studies Institute.

According to Dr. Abebe Ambachew, Senior Researcher at the Policy Studies Institute, the estimated revenue loss over a 13-year period could reach USD 83.3 million, with USD 5 million expected in the first year alone. He added that customs duties currently account for about 25.6% of Ethiopia’s total government revenue from imports.

“Given that most of Ethiopia’s trade occurs with non-African countries, the impact of AfCFTA-related tariff losses may not be as severe in the short term,” said Dr. Abebe. “However, the country must take steps to diversify revenue sources and strengthen its export base.”

Speaking at the launch of the ECOTRADE Project, Dr. Kassahun also emphasized Ethiopia’s limited experience in duty-free trade frameworks.

“We have primarily operated within a tax-based trade system and lack practical exposure to free trade. This transition will have direct implications for our customs operations and logistics systems,” he stated.

He further highlighted structural barriers beyond tariff-related issues, pointing to regional connectivity constraints. “Although Ethiopia’s aviation sector ranks first in Africa, it still cannot be effectively utilized for large-scale continental trade,” he added.

The African Continental Free Trade Area (AfCFTA) was signed on March 21, 2018, in Kigali, Rwanda, and officially entered into force on May 30, 2019, after reaching the required number of ratifications. Ethiopia ratified the agreement in 2019 but has yet to fully liberalize its tariffs or participate in the AfCFTA’s Guided Trade Initiative.

Current trade figures show that only 14% of Ethiopia’s exports are destined for African markets, while just 9.6% of imports originate from the continent. This indicates a limited level of trade integration with African partners and suggests that Ethiopia’s gains from AfCFTA may take time to materialize.

To mitigate the projected revenue gap, experts at the forum emphasized the need to expand alternative tax mechanisms and boost export performance, particularly in value-added sectors. Dr. Abebe noted that Ethiopia’s export and import volumes have both shown moderate growth over the past decade, presenting a potential foundation for greater regional trade integration.