Ethiopia Public Expenditure Review
Ethiopia’s remarkable socio-economic transformation over the last decade has been marked by: a reorientation of expenditure from recurrent to capital; a significant devolution of resources from Federal Government to Regions; and a clear prioritizat...
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Format: | Report |
Language: | English en_US |
Published: |
World Bank, Washington, DC
2016
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Online Access: | http://documents.worldbank.org/curated/en/2016/05/26385509/ethiopia-public-expenditure-review http://hdl.handle.net/10986/24370 |
Summary: | Ethiopia’s remarkable socio-economic
transformation over the last decade has been marked by: a
reorientation of expenditure from recurrent to capital; a
significant devolution of resources from Federal Government
to Regions; and a clear prioritization of infrastructure
spending, while protecting spending on education at four
percent of GDP. The Government of Ethiopia has also
leveraged external resources to boost spending in pro-poor
sectors, particularly health and social protection. As a
result, Ethiopia is home to the largest social safety net
program in Africa, and has also achieved remarkable health
outcomes using cost effective approaches. Recent investments
have seen a significant build-up of capital stock, with
capital spending at sector level pointing towards increased
service capacity. The current public investment-led strategy
requires to be complemented by increased budgetary
provisions in operations and maintenance so that new
investments translate into enhanced service coverage and
delivery. As Ethiopia lays the foundation to become a middle
income country, and the changing global environment implies
declining external assistance, it is imperative that
domestic taxation activity support this transition. The
current tax-to-GDP ratio is low compared to peer countries,
and the tax structure would benefit from increased
contributions by direct tax sources. Therefore, there is an
immediate need for advancing tax reforms and improve
capacity and quality of tax administration. Broadening the
tax bases, through review of exemptions, as well as review
of tax rates might be venues to consider. Additional
revenues will create the much-needed fiscal space to
increase funding for operations and maintenance for service
delivery, and support fiscal sustainability. As a follow-up
to this Public Expenditure Review, the Government of
Ethiopia has asked the World Bank to provide further
analytical support, with a view to enhance domestic revenue
mobilization through simpler and more efficient taxation,
while retaining equity priorities in public finances. |
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