The Citizens' Guide to EFY 2014 (2021/22) National Budget of
Ethiopia
Ministry of Finance
Addis Ababa/Ethiopia
What is inside?
Forwards……………………………………………………………………………………………………………….……i
Acknowledgements…………………………………………………………………………………………………iii
Abbreviations……………………………………………………………………………………………………………iv
Introduction…………………………………………………………………………………………………………………1
The Budget……………………………………………………………………………………………………………….…2
Macroeconomic Update (The macroeconomic and fiscal outlook) ………….……5
Where does the Government’s Money come from? …………………………………………5
Priorities in Allocations and Spending (Where is the money going?) …………..7
Budget terminology (glossary) ………………………………………………………………………………9
Forwards
Government of Ethiopia is committed to accelerate its economic progress by pursuing
pro-poor growth-oriented policies underpinned by a stable macro-economic environment.
the country’s fiscal policy is aimed at reducing poverty and improving the welfare of our
people by heavily investing in education to create human capacity, promoting basic
healthcare services, expanding infrastructure, building institutions, promoting governance
and pursuing decentralization. The pursuit of macroeconomic stability, pro-poor growth
and deepening of structural reforms has significantly contributed to the impressive
growth achieved over the past decade.
To boost up these progresses and to realize the newly introduced national home grown
economic reform agenda (macroeconomic, structural and sectoral reforms), Government
is committed to engaging citizens and remaining open to the public in the implementation
of public budget processes in securing the development of national development policies.
We have been already endeavored to promote transparency and exercising accountability
in all public institution through the project financial transparency and accountability as
part Public Financial Management Reform Ageneda. By this, the public has been able to
easily track the implementation of planned national expenditures and demand
accountability for results, accordingly.
The Ministry of Finance, has also published the Citizens Guide to the EFY 2014
(2021/22) National Budget, which is published for the first time. The Budget is in line
with the national 10 year development plan and the newly introduced national home
grown economic reform agenda (macroeconomic, structural and sectoral reforms) that
create a floor for job creation, poverty reduction, and inclusive growth in general. This
Guide is a simplified version of the National Budget that enables the public to easily
understand what is contained in the Government’s revenue and expenditure plans
approved by the Parliament. The Guide has been an instrument for strengthening public
trust in Government, and building confidence in state institutions.
i
Finally, I would like to remind and encourage all citizens to continue to engage and hold us
accountable in delivering our commitments.
Ahmed Shide (Minister)
Ministry of Finance
ii
Acknowledgements
This, Citizens Guide to the Budget of EFY 2014 (2021/22) was put together by the
Technical Working Team of the Ministry of Finance. Thus, our gratitude is due to
the Public Finance and Fiscal Policy State Minister, the Director of Public
Financial Management Reform for the support and approval of this citizens’
budget guide, and for the Technical Working Team members.
iii
Abbreviations
CSOs: Civil Society Organizations
EFY: Ethiopian Fiscal Year
FTA: Financial Transparency and Accountability
GDP: Gross Domestic Product
MEFF: Macro-Economic and Fiscal Framework
MOF: Ministry of Finance
SA: Social Accountability
SDGs: Sustainable Development Goals
iv
1. Introduction
The national budget arrangement shows that the government intends to do during the
period of its fiscal calendar and how it intends to finance its activities. The Ethiopian
government budget shows a process which government will decide on amount of tax to
be collected, services to be provided, and amount debt to take on in order to accelerate
economic growth and job creation opportunities, modernize infrastructure, and eradicate
poverty and inequality. To realize this, the government should inform and engage citizens
on these essential decisions that bring impact on their lives by producing a guide on this
Fiscal Year budget document.
What is a Citizens' Guide to a Budget? (The meaning of citizens' budget)
The citizens' budget document explains how the budget is formulated based on priority
needs, enacted, executed, evaluated and who is responsible at each stage. It clarifies
which level of government is responsible for performing different government functions
and providing services. More specifically, this citizens’ budget document summarizes
the overall budget document of a given fiscal year and explains basic information on
what services the government plans to deliver, how it will be done, who will do it, and
how much they will cost.
Why should Government Publish a Citizens’ Guide to the Budget?
A citizens’ budget document serves as a means to literate citizens about what the
government is doing and enhances their capacity to participate in government affairs and
to hold government accountable. It also allows the government to explain the rationale
behind the choices it made in putting the budget together for overall life improvement of
its citizens.
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2. The Budget
What is the Meaning of Public Budget?
Public budget is a document that forecast a government expenditures and revenues for a
given fiscal year. It indicates how a public entity spends the financial resources in order
to realize specific public goals. The document becomes a legal financial plan after it has
been approved through the legislative process of the country.
Why does Government Prepare Budget?
As there is never enough money to do all the things that the government would like to do
for its citizens, the budget acts as a tool that government uses to weigh up various needs
and decide how to allocate the available scarce resources according to priorities. The
identified priorities reflect the goals to which government is most committed and it will
be reflected in its budget.
What course of actions in the Budget? (Budget process at central and local
level)
The Ethiopian government budget process has four stages at all level of jurisdiction
(Federal, Regional, and Woreda government) which is guided by Financial Calendar
directive issued by the Ministry of Finance (MOF) to all public budgetary bodies
(institutions).
The four stages of government budget are:-
1. Budget Formulation (draft/design process),
2. Budget approval and appropriation (legislative process),
3. Budget execution (implementation process), and
4. Budget control (performance monitoring – audit and oversight).
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The budget calendar directive has a time table to ensure that planning and budgeting are
prepared, approved, appropriated and executed accordingly.
Budget
Process Main Activities at each Stage Responsible Body Time
Budget Macro-Economic and Fiscal MOF By 10th
preparation
Framework (MEFF) preparation. November
Based on MEFF, annual fiscal MOF By January
plan will prepared 24th
public investment program; MOF By 8th
annual subsidy estimates to February
regions; budget call to public
bodies
Public bodies submitting budget Public Bodies By 22nd
request March
Conducting budget hearing Public bodies with By 23rd May
MOF.
Approval of Recommended Executives By 30th June
budget
Budget approval of the budget and annual Legislators/the By 7th July
approval
appropriation of the approved parliament
budget
Budget Budget implementation All public bodies From July
Execution
8th to July
7th
Budget performance review and MOF/public From July
Control
control bodies/Auditor 8th to July
auditing public bodies General/legislators 7th
oversight
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How citizens can participate in the budget process?
Ethiopian constitution props up Citizens participation in overall public duties. For
instance, Article 89 Sub-Article 6 of the Constitution states that "Government shall at all
times promote the participation of people in the formulation of national development
policies and programs; it shall have also have the duty to support the initiatives of the
people in their development endeavors". Thus, multiple Participation channels are there
for the general public to participation in public budget processes and influence
government action in order to promote, debate, co-produce, decide and improve national
development endeavors at each level of administrative jurisdictions.
Citizens Participation mechanisms and processes
Citizens' repersentatives
• The legislatiors/parliament members are to hold the government’s
spending to account by scrutinizing its assumptions, its spending and
revenue raising plans, as well as the results of its spending and revenue
decisions.
Pre-budget Statement
•Consultation document which allows the public to understand spending and
revenue proposals for the new fiscal year and provides an opportunity for
public input before the budget is approved.
•Councils are invited CSOs, indiviguals, institutions and other concerned
bodies to have a say on executives budget propozal through differnet channels.
Participation Plateforms by Public Institutions
-Quarterly and annual monitoring meetings with stakeholders and
communty reperesentatives in planning/budgeting and performance
review activities.
Different Development Committes at Local Levels
•Established by executive branch of government structure and/or elected
community members responsible for community development initiatives.
Citizens Engagement Components
Promoting and strengthen accountability and transparency system at local
levels through different mechanisms/tools:-
-Pre-budget discussion tool by FTA-direct citizens prticipation forum at
woreda/local level planning to identify community priority needs.
-Social accountability tools 4by SA- enhance the capacities of citizens and
citizens' groups for basic services provision improvement.
3. Macroeconomic Update (The macroeconomic and fiscal outlook)
The macroeconomic and fiscal framework is a medium-term (three-five year) rolling
expenditure and revenue plan that is prepared annually and approved by the Council of
Ministers. The framework covers the financial resources (regular revenues, loans and
grants), total revenues and expenditures, federal and state expenditures, federal
government and capital expenditures and expenditures for five consecutive years; It
shows the budget support to the states, as well as the federal government's budget deficit
and budget deficit.
Accordingly, the Ethiopian economy was expected to grow by 8.5 percent in EFY 2013
(2020/21). However, the actual economic growth is expected to be lower than previously
thought due to the Covid-19 epidemic and instability in some parts of the country.
Regarding inflation rate, the Twelve Months moving average recorded in EFY March
2013 (2021) was 20.2 percent of the country's gross domestic product (GDP). The source
of this growth is the price of food and non-food commodities.
4. Where does the Government’s Money come from?
Government of Ethiopia has been allocated a total amount of 561.67 billion birr to meet
its commitments and provide services to the citizens for EFY 2014 (2021/22). Compared
to the previous budget year amount (476.01 billion birr), this year budget is bigger by
85.66 billion birr (18%). The total amount of budget for this fiscal year is sourced across
the following major categories:-
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Sources of Government Budget in billion birr
Total Budget
561.67 billion birr
The total budget deficit of the EFY 2014 (2021/22) is 2.67% of GDP and this deficit will
be planned to cover from basic service protection assistance, external project loans and
domestic loans.
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5. Priorities in Allocations and Spending
5.1. Government Priorities in allocations
The government budget allocation priority areas are in line with the past, present and
future macroeconomic projections and trajectories, the national 10 year development plan
and the newly introduced national home grown economic reform agenda (macroeconomic,
structural and sectoral reforms) that create a floor for job creation, poverty reduction, and
inclusive growth in general. The budget allocation is also considers the main challenges
facing the reform implementation.
5.2. Where does the money going?
The total amount for this budget year is allocated across the following major categories of
expenditure:
Expenditure Plan by Categories (in Billion Birr)
Expenditure Categories
EFY 2013 EFY 2014 Variation
Recurrent Expenditure 133.32 162.17 28.85
Capital Budget 160.33 183.55 23.22
Subsidy Appropriation to
176.36 203.95 27.59
Regions
Support for Achievement of
Sustainable Development 6 12 6
Goals (SDGs)
Total 476.01 561.67 85.7
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5.3. EFY 2014 Main Capital Budget Allocations in Billion Birr
66,6
70
60
50
40
26,9
30
16,4 18 15,79
20
10 3,74 5,09
0,5 2,21 1,2
0
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6. Budget terminology (glossary)
1) Administrative Jurisdiction: describes the authority of the administrative courts
to decide in the area of administrative law.
2) Budget Call: A Circular by MOF that contains budget preparation forms,
instructions and procedure for preparation and submission of detailed budget
estimates.
3) Budget Deficit: The gap between expenditure and revenue for the intended Fiscal
Year and expressed in terms of percentage of the Gross Domestic Product (GDP).
4) Budget Formulation: the process of determining the resources necessary for
organizations to carry out its programs, perform its mission, and to achieve
strategic objectives and goals.
5) Budget oversight: monitors the execution of the budget, to provide checks and
balances on the enacted budget.
6) Budget Request: an itemized summary of expenditure of an organization over a
specified period, usually a financial year submitted to MOF.
7) Budget Subsidy (Budget grant): Budget support provided to regions by Federal
government.
8) Capital Expenditure: the expenditure of funds by government for an asset that
is expected to provide utility for organizational service provision.
9) Citizens' Budget: a document that summarizes and explains basic public budget
information presented to citizens in an accessible format using simple and clear
language.
10) Citizen Engagement: Involve citizens individually or in the form of collective
action (including civil society organizations) in public service provision.
11) Domestic Sources: the process through which government raise and spend its
own funds from different sources within the country to provide services for its
people.
12) Economic Stability: the absence of excessive fluctuations in the macro economy.
Or an economy with fairly constant output growth and low and stable inflation
would be considered economically stable.
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13) External Assistance: support from external sources for budgeting to fulfill
expenditure obligation by the government for a given fiscal year.
14) Ethiopian Fiscal Year (EFY): a period of time used by the government for
annual financial statements from July 08 to July 7 (From Hamle 01 to Sene 30
according to Ethiopian Fiscal Year).
15) External Loan: loan from external sources for budgeting to fulfill expenditure
obligation by the government for a given fiscal year
16) Fiscal Policy: government spending and taxation to influence the economy.
17) Financial Resource/Revenue: sources of finance from which government obtains
the funds it needs to finance its investments, capital and recurrent activities.
18) Financial Transactions: an agreement, or communication, carried out between a
buyer and a seller to exchange an asset for payment.
19) Fiscal framework: the determination of financial resources available for
expenditures during the fiscal year.
20) Medium Term Fiscal Framework: fiscal arrangements that allow government to
extend the horizon for fiscal policy making beyond the annual budgetary calendar.
Three-year spending plans of the Ethiopian governments.
21) Gross Domestic Product (GDP): the monetary value of all finished goods and
services made within a country during a specific period.
22) Inflation Rate: the percentage change in the price index for a given period
compared to that recorded in a previous period. A price index means a weighted
average of the prices of a selected basket of goods and services relative to their
prices in some base-year.
23) Macro-economic: the structure, performance, behavior, and decision-making of
the whole or aggregate economy.
24) Macro-Economic Fiscal Framework (MEFF): the framework provides the
context under which fiscal targets are set, policy choices are determined, and
realistic revenue and expenditure projections are prepared.
25) Monitory Policy: a set of tools that a national bank has available to promote
sustainable economic growth by controlling the overall supply of money.
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26) Policy: a system of laws, regulatory measures, courses of action, and funding
priorities concerning a given topic publicized by a governmental entity or its
representatives.
27) Pre-Budget Discussion: a discussion forum held with community members at
Woreda (District) level to identify basic services priority needs which used as an
input for Woreda annual planning.
28) Pre-Budget Statement: a statement presents the broad parameters and
macroeconomic assumptions of the Executive’s Budget Proposal. It is at this
stage, before the proposed budget goes before the parliament, that decisions about
the size of the budget and how it will be allocated are made.
29) Public Entity (Public Budgetary Institutions): any entity established or
controlled by the federal government, including, but not limited, institutions of
higher education and related research institutions providing services to the public
on behalf of the government.
30) Recurrent Expenditure: expenditure on goods and services that does not result in
the creation or acquisition of fixed assets, and which consists mainly
of expenditure on wages, salaries and supplements, purchases of goods and
services.
31) Rolling Expenditure: a continuous budget that is updated regularly when the
earlier budget period expires or it is an extension of the current period budget.
32) Sustainable development Goals (SDGs): the blue print to achieve a better and
more sustainable future for all. They address the global challenges we face,
including poverty, inequality, climate change, environmental degradation, peace
and justice.
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