Financing Ethiopia's Development: Confronting the Gap between Ambition and Means

23 Pages Posted: 8 Aug 2014 Last revised: 31 Jul 2015

Derk Bienen

BKP Development Research & Consulting GmbH; Addis Ababa University

Dan Ciuriak

Ciuriak Consulting Inc.; C.D. Howe Institute; Centre for International Governance Innovation (CIGI); BKP Development Research & Consulting GmbH

Tadele Ferede

Addis Ababa University - Department of Economics

Date Written: April 2015

Abstract

Ethiopia set out – and in large measure achieved – a very ambitious program of economic and social development under its Growth and Transformation Plan I. The scale of public sector involvement was very large: for the five-year Plan period, it called for budgetary government spending and public enterprise off-budget spending of 41% of GDP, more than half of which was to come from budgetary resources. As Ethiopia prepares for version 2.0 of its GTP, it must confront a fiscal numbers problem: Ethiopia’s tax share of GDP under GTP I reached only the 12%-13% level, and revenue flows from official international assistance are shrinking. This paper dissects the financing challenge that Ethiopia must meet to achieve its goal of becoming a middle income country. It concludes that only export-led manufacturing in a context of a major expansion of the number of active formal enterprises coupled with best practice performance in all other areas related to revenue generation will square the circle of Ethiopia’s development financing challenge.

Keywords: Ethiopia, development financing, resource mobilization, tax, private sector development

JEL Classification: O16, O55

Suggested Citation

Bienen, Derk and Ciuriak, Dan and Ferede, Tadele, Financing Ethiopia's Development: Confronting the Gap between Ambition and Means (April 2015). Ethiopian Journal of Economics, Volume XXII No.2, October 2013: 21-62 (published April, 2015). Available at SSRN: https://ssrn.com/abstract=2477384

Derk Bienen

BKP Development Research & Consulting GmbH ( email )

Jutastr. 14
München, 80636
Germany

Addis Ababa University ( email )

King George VI St
Addis Ababa, 1000
Ethiopia

Dan Ciuriak (Contact Author)

Ciuriak Consulting Inc. ( email )

83 Stewart St.
Ottawa, Ontario K1N 6H9
Canada

C.D. Howe Institute ( email )

67 Yonge St., Suite 300
Toronto, Ontario M5E 1J8
Canada

Centre for International Governance Innovation (CIGI) ( email )

57 Erb Street West
Waterloo, Ontario N2L 6C2
Canada

BKP Development Research & Consulting GmbH ( email )

Romanstrasse 74
München, 80639
Germany

Tadele Ferede

Addis Ababa University - Department of Economics ( email )

Addis Ababa
Ethiopia

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