Iran war likely to spike Ethiopia’s spending in next financial year

Ethiopia’s government expects overall spending will rise next fiscal year mainly due to costs related to the Iran war, its finance minister said on Thursday. Minister Ahmed Shide said in a budget speech that overall spending was projected to rise to roughly 2.34-trillion birr ($14.69bn) in the 2026/27 fiscal year that starts next month, from 1.92-trillion birr in the current fiscal year. “This increase mostly takes into account expenses related to the Middle East crisis,” the minister told lawmakers.

He did not elaborate on the costs caused by the Iran war, but the government has increased fuel subsidies since the war started. A budget deficit of 1.4% of GDP is expected in the next fiscal year, smaller than the deficit of 2.2% of GDP the finance ministry forecast a year ago for this fiscal year. The government predicts economic growth of 10.1% next year, similar to this year’s growth.

Ethiopia’s export revenue over the first 10 months of this fiscal year stood at $8.7bn, Ahmed said, and by the end of the year the country expects to earn $10.5bn from its exports. The Horn of Africa country’s export figures are closely watched by markets as they have been at the centre of a row between bondholders and the government over whether Ethiopia faces an insolvency problem or a liquidity issue. Restructuring talks over Ethiopia’s $1bn international bond hit another stumbling block last month when bondholders rejected the government’s latest offer.

[paywall]

Some bondholders are planning to take legal action. “Debt restructuring negotiations, including with Eurobond creditors, are currently under way, and we are close to reaching an agreement with some of them,” Ahmed said.

[/paywall]