For the coming budget year the government targets to fill the major share of the budget deficit from Treasury bill (T bill) against direct borrowing. The tax collection from indirect taxes is also set as a major source for the period.
It has been recalled that Minister of Finance (MoF), Ahmed Shide, delivered his budget speech for the 2020/21 for parliament few weeks ago. For the budget year that will commence on July 8, 476 billion birr was tabled for ratification that has an increment of 7 percent from last year’s budget that includes the supplementary budget.
From the total budget tabled for the year the deficit is 126 billion birr, which is less than three percent of the gross domestic product (GDP) and of this 48 billion birr will be covered from external borrowing, while 78 billion birr will be filled from domestic borrowing.
During the hearing at the Revenue, Budget and Finance Standing Committee held on Wednesday June 25 Eyob Tekalign, State Minister of MoF, explained that the major share from domestic borrowing will be taken from T bill that the country reintroduced this budget year with attractive interest rate.
He said that the direct borrowing from the National Bank of Ethiopia (NBE) will not exceed 30 billion birr. International financial institutions advice that the budget deficit should not exceed from three percent of the country’s GDP and mostly the deficit for Ethiopia does not reach the percentage stated above.
At the same time filling the budget gap from direct borrowing from NBE is one of the instrument that hike the inflation since it is direct finance pump or money print.
This time around he said that the government is mainly using the finance sucked from the market than direct borrowing from NBE. He argued that for the budget year that is ending the central bank has traded 20 billion birr at the T bill auction, which is way much higher than the target. The target was to collect about 6 billion birr from T bill auction.
“It shows how the government will cover the major share of the budget deficit from T bill than money print,” he explained.
The NBE T bill that commenced in December last year with features and market base interest rates attracts private actors like financial institutions besides the traditional pension funds.
Eyob told Capital that in the 2020/21 budget year the government is expected to get up to 45 billion birr from T bill market. “It will make the direct borrowing to reduce from 25 billion to 30 billion birr,” the State Minister added.
“We reformed the T bill to collect liquidity from the market and our target was to amass 6 billion birr until the end of the budget year that will be closed on July 7 but the actual result is close to 20 billion birr until now,” he elaborated.
The T bill auction is held every two weeks under NBE. The domestic loan that is in total of 78 billion birr is 1.8 percent of the GDP.
On the session the standing committee members raised that the current COVID 19 effect would reduce the tax collection for the year of the coming budget year, while the budget proposal stated that the tax collection will cover 271.7 billion birr that has an increment of 11 percent compared with the projection for the current budget year.
“The current condition affects the economy and how could you collect the stated amount of tax for the year,” the standing committee members asked.
Eyob, who agreed with the concern, said that the government will focus on indirect tax than corporate tax. “You are right the corporate tax (income tax) will be reduced in the coming year due to the effect of the virus but the tax collection from indirect sources will fill the expected tax collection targets,” he explained.
In his speech presented on June 11, Ahmed said that the value added tax reform will be applied besides improving the tax administration. “Tightening the tax incentive management will also improve the government revenue collection for the year,” he added.
“The tax projection is of course ambitious but realistic,” Eyob said this week. In the year the government has also targeted to introduce property tax.
The tax GDP ratio will be at 6.6 percent at real market value, according to Ahmed. It indicates that the country tax collection growth rate compared with the GDP is not going proportionately and even it is reducing year to year.
The country tax to GDP ratio is very low compared with peers in the region. The government is interested to boost the ratio as high as 17 percent, while in actual terms the performance is reducing from time to time.
In the budget, as usual the Ethiopian Roads Authority (ERA) secured the biggest budget allocation with 50 billion birr from public coffer and 9.6 billion birr from international loan and donation.
“Our proposed budget for the year in total is 59.6 billion birr that has a 29 percent increment compared with the 2019/20 budget year,” Samson Wondimu, Public Relation Head at ERA, told Capital.
According to the State Minister of MoF, the budget allocated for debt settlement is 37 billion birr that has an increment of 12 billion birr from the current budget year.
T Bill to fill budget deficit
Ethiopia will fill dam within next 2 weeks
Ethiopia is scheduled to begin filling the Grand Ethiopian Renaissance Dam (GERD) within the next two weeks, during which the remaining construction work will continue and negotiations will be concluded, according to Office of the Prime Minister.
The statement issued on Saturday June 27, said that the three countries have agreed to reach a final agreement with few pending matters remaining.
“Ethiopia is scheduled to begin filling the GERD within the next two weeks, during which the remaining construction work will continue,” said the statement, adding that “it is in this period, that the three countries have agreed to reach a final agreement on few pending matters.”
The Extraordinary Meeting of the Bureau of the African Union Assembly was held virtually on Friday June 26, on the ongoing negotiations between Ethiopia, Sudan and Egypt with regards to the first filling and annual operation of the GERD.
The meeting was convened by South African President and African Union Chair, Cyril Ramaphosa, with the participation of heads of state of Ethiopia, Sudan, Egypt and members of the Assembly Bureau.
The leaders underscored that the Nile and the GERD are African issues that must be given African solutions. The heads of State of Ethiopia, Sudan and Egypt provided a statement on the status of the negotiations and the meeting set directions on the way forward.
Accordingly, the three countries have agreed to conclude the negotiation and try to reach an agreement within the next two weeks before Ethiopia starts filling the dam.
The meeting also resolved to notify the United Nations Security Council that the African Union seized the matter. It also instructed the African Union and members of the Bureau to provide technical support for the negotiations and urged Ethiopia, Sudan and Egypt to cease unnecessary media escalation, the statement said.
Prime Minister Abiy Ahmed in his Facebook post said “I appreciate Chair of the AU, President Cyril Ramaphosa, for his leadership in facilitating these high-level talks of continental significance. Gratitude also to AUC Chairperson Moussa Faki. Our continental organization, with a Pan-African spirit, is the right space to dialogue on issues that are of value to Africa.”
The GERD offers all stakeholders the opportunity for unprecedented economic growth and mutual development, he added.
The Extraordinary Meeting of the Bureau of the African Union Assembly held on Friday was attended by Prime Minister Abiy Ahmed, President Abdel Fattah al Sisi, Prime Minister Abdallah Hamdok, African Union Chairperson Moussa Faki, AU Chairperson and South Africa President Cyril Ramaphosa, President Ibrahim Boubacar Keita of Mali, President Uhuru Kenyatta of Kenya, and President Felix Tshisekedi of DR Congo.
First session of Capital’s webinar on COVID-19 conducted
Second session live on Tuesday
Participants who attended the live coaching conducted by Capital Newspaper on June 23, as part of its webinar series, with the first session on the theme “Building Resilience and Finding Serenity through COVID-19,” said that the session was helpful in terms of understanding and handling stress in this difficult time.
The training conducted by Transformative Leadership Coach and Trainer Yene H. K. Assegid, highlighted that the worldwide outbreak of the coronavirus disease (COVID-19) is a source of unexpected stress and adversity for many people.
“Resilience can help us get through and overcome hardship. But resilience is not something we are born with-it’s built over time as the experiences we have interact with our unique, individual genetic makeup. That’s why we all respond to stress and adversity-like that from the COVID-19 pandemic-differently,” Yene said.
During the webinar Yene also responded to questions from participants that gathered from different parts of the world. “What can we do to build up and strengthen resilience right now during the COVID-19 outbreak? How can we build resilience to plan ahead for future times of crisis?” and other questions were addressed by the Transformative Leadership Coach and Trainer.
“The main point is to try to stay positive. Unload the negative side,” she stressed to the participants of the first three sessions of the webinar.
The second session will be held on June 30 under the theme ‘Emotional Intelligence & Teams’ and the third and last session will be held on July 7, under the theme ‘Dynamics of High Performance Teams.’
All sessions are presented in the context of the current situation of COVID-19 and are brought to the community at large, compliments of Capital Newspaper.
“The sessions are organized with our readers at heart, whom we value very much,” said Teguest Yilma Managing Director of Capital Newspaper. “Capital’s journalistic mission and vision is always disseminating valuable information but also enriching society with the exchange of ideas. COVID-19 has dealt us with an unprecedented situation where we are all obliged to step up our capacity to cope. We will get through this together,” she added.
Dr. Yene Assegid has been designing and delivering Leadership Programs world-wide for over 25 years. She is accredited by the International Coaching Federation, ICF, as the highest possible level of Master Certified Coach (MCC) which puts her in the top 4% of professional coaches world-wide.
Utility tower theft left eastern part of Addis in the dark
The Ethiopian Electric Power (EEP) announced that the theft of the electric transmission tower at the eastern part of Addis Ababa is the first of its kind that happened in the city.
On June 24 the 132 kilo volt power transmission tower located around Bole Lemi Industry Park was damaged by individuals who then stole part of the tower.
The incident affected the power supply at the industry park and surrounding areas of Addis Ababa for days.
Moges Mekonnen, Public Relation Head at EEP, said that such kind of theft particularly in the capital city is new.
“Meanwhile the robbery affects very limited part of the city the damage is very huge that cost big amount for those who depend on it,” Moges said.
According to the Public Relation Head, the power transmission line theft usually happen mainly in southern part of the country like Wolaita, Gamo Gofa and Sidama zones, while the current incident is very rare for cities.
“Our towers are stretched all over the country and passes through forests and mountains and mainly the bandits’ focus on the towers located in remote areas,” he added.
He told Capital because of the theft at Bole Lemi the conductor is damaged and the loss is estimated to be about half a million birr.
“The power supplied to the industry park, which is mainly engaged on the production of textile for export, is significant but the details will be disclosed by Ethiopian Electric Utility, which is responsible to administer the power distribution,” he added.
According to the statement EEP disclosed on its social media on June 24 besides the industry park, Summit Condo compound, Bole Arabsa, Airlines Association residential area, Goro, ICT Park, Gerji Wore Genu, and Gerji Kazanches were affected.
EEP’s Transmission and Substation Operation Division technicians have been in duty to maintain the damage until we went to print on Saturday afternoon. Moges said that the line is expected to commence operation by Sunday June 28.
He reminded that EEP, which is so far the sole power generator and distributors, was under preparation to organize a symposium with relevant organizations and government entities of law enforcement to tackle the theft problem, but the current COVID 19 incident suspended the plan.
