Addis Ababa: Ethiopia has bolstered domestic resource mobilization through tax reforms, and improved administration resulting in a 24.8 percent average increase in revenue over the past three years, according to Minister of Finance.
The First preparatory meeting for the 4th International Conference on Financing for Development is underway in Addis Ababa.
Following the opening session today, a ministerial panel discussion was conducted.
At the panel discussion, Minister of Finance Ahmed Shide highlighted Ethiopia’s efforts in domestic resource mobilization, reform tax policy and administration, enhance public expenditure and crowd-in private sector participation in public investment projects, among other related issues.
Nine years ago, the global community convened in Addis Ababa to adopt the Addis Ababa Action Agenda evolved framework designed to mobilize financial resources for the implementation of sustainable development goals (SDGs).
Ahmed said Ethiopia has made significant strides implementing our a
ction agenda in advancing towards sustainable development goals. “We have notably enhanced financial inclusion, expanding access to financial services across our population.’
‘It’s quite notable advancement in several areas. Our journey has been hardwares. The full potential of Addis Ababa Action Agenda remains largely untapped,’ he stated.
According to the Minister, since 2015, the number of banks and branches has grown substantially underpinned by a regulatory framework supporting digital financial services, which are spurred innovation and competition.
Mobile banking users have soared from 4.9 million in 2019 to 27.9 million in 2023, he said, adding despite these gains, challenges persist particularly in rural areas without underdeveloped financial infrastructure.
The minister said Ethiopia has bolstered domestic resource mobilization through tax forms, and improved administration resulting in a 24.8 percent average increase in revenue over the past three years.
Despite this positive achievement, he a
cknowledged challenges such as tax avoidance and a large informal sector continue to affect revenue mobilization and collection contributing to persistently low tax to GDP ratio.
The nation has designed a Homegrown Economic Reform Agenda which incorporates macro-economic reform, structural reform and the sectoral reform as major policy issues.
The reform includes pivotal changes in tax policy, as well as improvement in the efficiency of public investment to reverse the declining tax to GDP ratio and utilize the country’s potential tax capacity up to 20 percent of the GDP, the minister elaborated.
According to Ahmed, Ethiopia has continued to increasingly invest on pro-poor sectors and social protection programs such as health, education and water. As a result of this investment access to primary health care services and enrollment in primary school has increased significantly.
However, the challenge of debt servicing and the fluctuations in ODA has undermined the sustainability of spending on pro-poor sec
tors, he said, adding the share of ODA declined by one percent of GDP in 2023, from 3.2 percent in 2020.
Therefore, he stressed that addressing this financial pressure is critical. This includes supporting the government in enhancing debt sustainability, and scaling up development financing.
Moreover, Ahmed added that Ethiopia has continued its commitment to building a carbon neutral and climate resilient economy. During the past couple of years, the country has restored millions of hectares of degraded landscapes, including through the green legacy program.
‘We have managed to increase our national forest cover to 23.6 percent in 2024, from 14.7 percent in 2014.’
Despite our achievements, developing countries like Ethiopia continue to face significant financing gaps, exacerbated by recent global crises such as COVID-19 pandemic, geopolitical conflicts, and economic instability.
The Addis Ababa Action Agenda has underscored the need for a comprehensive and inclusive approach to financing development to a
ddress these challenges, and accelerate the implementation of SDGs on a coordinated actions.
‘We must advocate for comprehensive reform of the international financial architecture including improving global economic governance, enhancing debt relief measures, and reducing the cost of sovereign borrowing.’
Mobilizing private investment and strengthening multilateral development banks are also critical steps, he noted.
Ahmed reiterated that innovative financing mechanisms such as debt for climate swaps, carbon trading green bonds should be promoted and leveraging technology for sustainable development.
Source: Ethiopian News Agency