Wednesday, June 12, 2024
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MoF dispenses 73% of budget allocation to public offices

By Muluken Yewondwossen

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The Ministry of Finance (MoF) committed 73 percent of the 426 billion birr that it intended to distribute for public offices at the central government in the first nine months of the 2023/24 budget year. The government’s temporary debt payment suspension, which it obtained from the official creditors committee, helped to reduce the load on the budget for the year.

According to the income and cash flow management, the total amount disbursed to central government offices in the last nine months has been 309 billion, which is 117 billion birr short of the target, according to Minister of MoF Ahmed Shide.

During his presence on May 22, the Minister informed the Plan, Budget, and Finance Affairs Standing Committee, “We are not transferring as per the budget allocation due to it being held based on the revenue and cash flow management.”

The committee members stated that governmental offices would not be able to carry out their tasks since insufficient funds were allocated.

In response, Ahmed stated that “the disbursement is also considered project performances” and that “the direct advance (DA) has been minimized.” He guaranteed that all funds allocated for public offices will flow in the remaining three months of the budget year.

For the fiscal year 2023/24, the central government received 573.5 billion birr out of the 802 billion birr approved budget.

MoF was targeted to provide 157.9 billion birr in block grants to regions and for projects under the Sustainable Development Goals in the first three quarters of the budget year; however, the actual amount disbursed was 163.1 billion birr, or 103.5 percent of the target.

The Minister said, “The disbursement shows increments due to some of the regions taking their budget allocation for the year in advance.”

According to the report, 331 billion birr in income were obtained from the Ministry of Revenue over the specified time, and 470 billion birr have been disbursed overall, while Treasury bills (T-bills), Treasury bonds, and DA are the primary means of covering the 139 billion birr deficit.

While the generation was 331 billion birr, the government is expected to generate 356.5 billion birr from taxes and duty in the first nine months of the budget year.

For the specified time, the actual performance was about 93 percent of the target, and for the year, it was 68 percent of the target.

According to Ahmed, over the nine months of the budget year, 111 billion birr was meant to be paid off, but only 65 billion birr were actually paid for both local and overseas creditors.

He stated that the suspension of payments from bilateral creditors through the official creditors committee is one of the main causes for the service reduction.

The government has an interim debt repayment suspension of USD 1.44 billion that was scheduled to be paid in the current and upcoming budget year.

“Negotiation is underway to get an additional USD 0.49 billion debt suspension from bilateral creditors,” Ahmed said.

While state-owned enterprises (SOEs) were expected to pay USD 512.3 million for external lenders within the specified time, the actual service settled was USD 52.9 million, or about 10 percent of the total. Since it is a component of the temporary debt suspension granted by the bilateral creditors, it is decreased.

“The debt suspension has made a substantial contribution to relieving the burden of the budget deficit,” stated Ahmed.

The budget deficit is being covered by an increase in domestic debt.

The MoF paid out 470 billion birr for public offices in the first nine months of the budget year; the remaining 139.2 billion birr represented a deficit, which was primarily compensated by domestic sources.

The government has raised 88.7 billion birr in the first nine months of the budget year through T-bills and Treasury bonds. The latter was introduced in November 2022 and requires commercial banks to purchase bonds at a rate of 20 percent of each new loan disbursement.

Banks have bought 27.3 billion birr worth of Treasury bonds with a five-year maturity during the budget year mentioned.

Ahmed stated that the MoF obtained 57 billion birr DA from the National Bank of Ethiopia during the budgetary year, compared to 147 billion birr the previous year.

The Board of Directors of NBE has resolved to restrict such lending to a maximum of one-third of the previous year’s levels at the start of the budget year. The real sum, though, is a little bit more than the goal.

In the nine months of the budget year, the entire public sector debt, including domestic debt, was valued at USD 65.7 billion.

Ahmed stated that the ratio of total debt to GDP is 40.2 percent, “which is within a tolerable range when compared with other countries with similar economies; the country should improve the debt service to export ratio, which is the major challenge.”

The sum of the external debt, which is USD 28.4 billion, or 17.4 percent of GDP, includes USD 8.4 billion owed by SOEs.

Ahmed claims that the central government owes USD 20 billion in total external debt, which somewhat increased as a result of the World Bank’s concessional loan issuance.

He stated his optimism that the nation’s debt load would be moderate in the next years if the government and the G20 member nations established an agreement through the Common Framework.

Ethiopia is undergoing negotiations for a debt re-profiling under the Common Framework with the official creditors committee, however, these negotiations are taking a very long time to finish.

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