By Hayal Alemayehu

During the first nine months of the current Ethiopian fiscal year, fuel import bills have for the first time surpassed export earnings as reported in this newspaper three weeks ago. The government spent over 10 billion birr for fuel imports during the stated nine months, while export earnings secured during the same period were less by tens of millions of birr.

Two weeks ago, the National Bank of Ethiopia had said that oil import is threatening the economy, disclosing that fuel import bills had exceeded export earnings this year.

Top on the agenda of the Ministry of Finance and Economic Development budget report to parliament this week was none other than the same issue: fuel import bills are severely hurting the economy.

Finance Minister Sofian Ahmed told parliament on Tuesday that the continuous increase in fuel prices, especially during the current year, had hurt the economy very much.

"Although the fair increase witnessed in world coffee price over the last three years, was appreciable, the price hike in fuels, which was more pronounced this year, had badly hurt us," the minister said while presenting budget allocation for next year.

"The price of fuels has more than a doubled this year. This has brought about a significant negative impact on the economy, both directly and indirectly," the finance minister said in his budget speech. "The government had been subsidizing the increment. However, it has now been forced to partially lift the subsidy because the fuel price does not took to improve."

The minister said that the price hike had imposed pressure on foreign reserves, thereby highly influencing the country's balance of payments.

According to the minister, the country's trade balance is getting widened further owing to the increase in price and volume of import goods. During the 2005/6 and the 2006/7 fiscal years, export earnings covered only 23.3 percent of the price of import goods brought in the country during the same years, according to data compiled by relevant government agencies.

The minister said that next year's budget allocation, which is subjected to parliament approval in a month's time, takes into consideration the performance of the import/export trade observed over the last few years, among others.

The general economic performance and measures taken to stabilize inflation over the last few years are also taken into consideration in proposing the budget, the minister said.

According to the minister's budget report, the government target is to secure 32.1 billion birr financing from domestic sources for the next fiscal year. The amount targeted to be secured from domestic sources is up by 27.2 percent compared to that of the current budget year.

Tax revenue is expected to increase by 28.8 percent while non-tax revenue forecast surpasses that of this current year's by 21.6 percent, according to the report.

Direct tax revenue is projected to pick up by 28 percent, while indirect tax revenue is expected to grow 31.3 percent.

The minister's budget report indicates that next year's Protection of Basic Services (PBS) aid from major donor countries is expected to hit 6.7 billion birr, which if all goes according to the expectation, will exceed that of the current budget year's by 40.5 percent.

Taken together, the total amount of income from domestic sources, PBS aid and debt relief is expected to reach 39 billion birr, an amount that surpasses that of this current year by 25.7 percent, according to the minister's report.

The government's regular expenditure for the next year will, as usual focus on activities and sectors related to poverty alleviation, the report noted. Accordingly, the ministry allocates 13.4 billion birr regular budget for the next fiscal year, which exceeds that of the current year's by 24.1 percent.

According to the ministry's budget proposal, the capital budget for the next fiscal year will be 23.4 billion birr, provided the approval of the parliament.
The budget report indicates that some 16.6 billion birr budget will be allocated for regional governments, the amount exceeding that of the current year by 22.1 percent.

Of the total allocation, capital budget is the highest, followed by the budget allotment for regional governments. The report states that the budget allocations reflect priority given to development work. Regarding infrastructure development the budget allocated some 7.3 billion birr for new and upgrading road projects. Accordingly, 128 new road construction and expansion projects will take place next year with the allocated budget, the report indicated.

The total budget allocated for the next fiscal year stood at 54.3 billion birr, which if approved by parliament, will outpace that of the current fiscal year by 10 billion birr.

The total budget allocated for next year surpasses the envisaged government's income during the same period by 8.8 billion birr. The report indicates that the balance will be covered by domestic credit and foreign aid projects.