Ethiopian Council of Ministers has proposed a macro economic and fiscal package to help shoulder the huge budget of the country’s defense sector for the next three years. The policy package drafted in March 2009, by Ministry of Finance and Economic Development (MoFED) was sent to the federal parliament two weeks ago after getting approval of the council.
To check the soaring inflation and severe foreign currency shortages, which have been blamed for the disorder caused to the macro economy, the Ethiopian government has introduced a new policy package for the three coming years. The package plans to give priority to intensive development projects to salvage the current macro economy instability.
The proposal, however, plans to uphold the country’s defence 4 billion birr annual budget for the next three years. This measure “contradicts the core idea of the policy package”, according to some opposition MPs after studying the contents of the new document.
The defense budget is only second to the country’s road development sector, which has remained the topmost priority for the past five years. The policy package proposes over 10 billion birr for the road construction sector in the three coming years.
The defense budget continually increased after the end of the Ethio-Eritrea war was stabilized only three years ago with an allocated annual budget of 4 billion Birr. “This was acceptable giving the fact that the country had been in war with different rebel groups including Somalia”, the MPs told Afrik-news.com. “Nonetheless, the danger of armed political confrontation has diminished and it is now time to give priority to other development projects in view of the current economic crisis that is hindering the country’s economic growth”
Although it has now declined significantly, inflation hit the highest point in June 2008, at 64 per cent. In March, 2009 growth rate declined to 23.7 per cent. The country’s foreign currency reserve, which has also declined, now stands at 850 million USD, a severe shortage that represents only six weeks of essential imports.