July 1, 2010 / 4:00 PM / 8 years ago

Ethiopia says record budget to boost infrastructure

ADDIS ABABA (Reuters) - Ethiopia on Thursday passed a record 77.2 billion birr annual budget that targets infrastructure development to drive growth in one of Africa’s poorest but fastest-growing countries.

Ethiopia's Prime Minister Meles Zenawi addresses the media inside his office in the capital Addis Ababa September 16, 2009. REUTERS/Irada Humbatova

The 2010/11 budget is up 20 percent from 64.5 billion birr in 2009/10 and is the biggest budget ever approved by the country’s parliament.

Prime Minister Meles Zenawi told MPs that Ethiopia had budgeted a bigger slice of its total budget — 70 percent — on poverty reduction and infrastructure development programs than any other country in Africa.

“The government is working hard to electrify rural towns and a large amount of our development spending will go on roads,” Meles said.

The figures in the budget were unchanged from a draft proposal presented to parliament for debate last month by Finance Minister Sufian Ahmed.

Ethiopia says its economy has grown by an annual average of 11.18 percent over the last four years on improved infrastructure and its government is striving to attract foreign investors in agriculture, mineral exploration and hydropower.

While Meles says he expects growth of about 10 percent for 2010, the International Monetary Fund predicts much lower growth of just over 5 percent.

Opposition parties say the ruling party inflates the growth figures to attract investment and that growth has not filtered down to the poor in a country where last year, 13 million out of 80 million people needed foreign food aid.

Prime Minister Meles, who has led the country for almost 20 years, last month won five more years of power in a landslide election victory criticised by European Union observers and the United States.

Potential foreign investors are closely watching the post-election situation after the country’s last disputed poll in 2005 ended with street violence.

ROAD BUILDING

Of the total budget, 35.9 billion birr will go on development spending, a rise of 23.4 percent, while regular spending is up 17.2 percent to 17 billion birr.

Just over 24 billion birr will go to Ethiopia’s nine federal regions to spend locally. The development budget will mostly go on roads and electrification, with the country’s road network getting a 12 billion birr boost, Meles said.

Ethiopia has spent $3.6 billion on roads over the last decade. Some 10 percent of the total is earmarked for developing the country’s crucial agricultural sector. Ethiopia, Africa’s top coffee exporter and second biggest exporter of sesame seed, is mainly reliant on agricultural exports.

Domestic revenue accounts for 41 billion birr of the budget, 15 billion birr is from aid and the 21 billion birr deficit will be paid by external loans and grants.

Opposition politicians questioned Meles on how confident he was the deficit of more than 20 billion birr could be secured from foreign sources in an election year in which they said Ethiopia’s relations with the West had been damaged.

“The 20 billion birr is little of the total pledged money and we have made sure it will land,” Meles said. “There is zero chance this money won’t make it.”

Meles said defence spending would increase 10 percent to 4.4 billion birr. Ethiopia, with the biggest army in the Horn of Africa, is the key U.S ally in the region and entered neighbouring Somalia in 2006 to oust an Islamist group that had taken control of the capital Mogadishu and much of the country.

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