thiopia’s cabinet has approved a nearly 2 trillion birr ($15 billion) national budget for the 2025/26 financial year, representing a 31% increase from the previous fiscal year. The announcement, made on Thursday by the Prime Minister’s Office, reflects the government’s ambitious push to accelerate economic recovery, support national security and boost productivity amid ongoing reforms and international partnerships.
The budget, which now awaits parliamentary approval, is designed to strengthen Ethiopia’s strategic priorities, including disaster response, support for vulnerable populations and agricultural productivity. It also places emphasis on critical subsidies to ensure access to essential commodities like fuel, medicine and fertiliser, areas where Ethiopia has faced inflationary pressure and supply disruptions in recent years.
The increase in expenditure comes as the East African country pursues sweeping economic reforms under a four-year agreement with the International Monetary Fund (IMF). The $3.4 billion programme, signed in July 2023, is aimed at stabilizing Ethiopia’s macroeconomic environment, restoring debt sustainability and enhancing structural resilience. Just last week, the government and the IMF reached a staff-level agreement on the third review of the loan, signaling continued progress toward meeting reform benchmarks.
Key pillars of Ethiopia’s economic reform agenda include the gradual floatation of the birr currency and efforts to restructure its external debt with bilateral and multilateral creditors. The country has also undertaken privatisation initiatives in key sectors and is working to liberalize the telecom and banking industries.
In the previous fiscal cycle (2024/25), the government allocated 971.2 billion birr in June and followed up in November with an additional 581.98 billion birr to address rising costs in essential imports. The dramatic expansion of the 2025/26 budget reflects Ethiopia’s attempt to balance fiscal stimulus with reform, despite enduring fiscal and external imbalances.
As Ethiopia continues to navigate a complex mix of internal challenges and external debt obligations, the newly proposed budget signals a commitment to inclusive growth and long-term economic transformation, supported by international cooperation and a bold domestic policy agenda.
