In a landmark move signaling the government’s commitment to economic transformation, Ethiopia’s Council of Ministers has approved a historic draft federal budget of nearly ETB 2 trillion (approximately $35 billion USD) for the 2025/2026 fiscal year. This record-breaking budget—the largest in the country’s history—has now been submitted to the House of People’s Representatives (HoPR) for further scrutiny and deliberation.

Prioritizing Development, Stability, and Innovation

The proposed budget is structured to reflect the nation’s strategic priorities as outlined in Ethiopia’s Ten-Year Development Plan and the 2026–2030 Medium-Term Macroeconomic and Fiscal Framework (MTFF). These priorities include:

• Strengthening national security and public order
• Revitalizing economic productivity across key sectors
• Investing in infrastructure and capital projects
• Supporting displaced populations and vulnerable communities
• Accelerating progress toward the Sustainable Development Goals (SDGs)

The Council noted that this expansive fiscal package is essential to respond to complex challenges while ensuring that Ethiopia remains on a path toward inclusive and sustainable growth.

Budget Composition and Allocation Focus

The ETB 2 trillion budget proposal is expected to include:

• Recurrent expenditure: Funding to maintain essential public services such as education, healthcare, and public administration.
• Capital expenditure: Significant investment in physical infrastructure—roads, energy, water, and public works—critical for stimulating economic activity.
• Block grants and subsidies to regional states: Reinforcing Ethiopia’s federal structure and supporting regionally-led development efforts.
• Special programs for job creation, youth empowerment, and technology infrastructure

Moreover, the Council of Ministers advised the House to explore additional funding sources, such as concessional loans and external partnerships, to ensure the successful implementation of high-impact national projects.

A Legislative Leap for Startups and Innovation

Alongside the draft budget, the Council also endorsed a new draft startup proclamation, a progressive legislative move aimed at catalyzing Ethiopia’s emerging tech and innovation landscape.

The proclamation, if passed, will:

• Establish a legal and institutional framework to support startups
• Create mechanisms to close financing gaps that limit early-stage business growth
• Provide incentives and regulatory clarity for entrepreneurs and investors
• Enable cross-sector digital transformation, fostering innovation in agriculture, health, education, logistics, and finance

Officials noted that this legislation is a strategic step in transforming Ethiopia into a regional tech hub, and part of broader economic reforms to attract private investment, both domestic and international.

What’s Next?

The House of People’s Representatives will now engage in detailed discussions, amendments, and eventually a vote on the proposed budget and accompanying legislative initiatives. If ratified, the budget will go into effect at the start of the Ethiopian fiscal year in Hamle 1, 2017 (July 8, 2025).

This fiscal proposal not only reflects the administration’s ambitions for economic modernization but also underlines the challenges of balancing development goals with macroeconomic stability in a complex domestic and global environment.

As the debate unfolds, stakeholders across the private sector, civil society, and international development community will be watching closely to see how Ethiopia aligns its bold fiscal vision with tangible impact on the ground.