On June 11, 2026, during its 25th Regular Session, the 6th Ethiopian House of Peoples’ Representatives extensively deliberated on the presented 2.339 trillion Birr federal government draft budget for the 2019 fiscal year before granting its approval. This approved budget is stated to take into account the structural development and macroeconomic reform goals formulated by the government. To ensure a higher level of transparency and accountability within the financial ecosystem, the budget was referred to the Standing Committee on Planning, Budget and Finance Affairs for an in-depth evaluation prior to its ratification. This total approved budget exhibits a 21.3 percent growth compared to the previous fiscal year and is noted to incorporate a structure that balances the country’s concrete macroeconomic reforms and development demands.
In terms of budget allocation, 1.236 trillion Birr has been allocated for recurrent expenditure, which constitutes the highest share of the total budget at 52.9 percent. On the other hand, 568.2 billion Birr has been allocated for capital expenditure, indicating a focus on completing existing projects rather than multiplying new initiatives. The remaining component of the budget is dedicated to strengthening the federal structure; accordingly, 520.6 billion Birr has been approved as budget subsidies to national regional states and 14 billion Birr has been allocated for the implementation of Sustainable Development Goals (SDGs) at the regional level.
Within the recurrent expenditure, which holds the highest share, calculations that take into account the country’s financial pressure and the security of strategic products are said to be included. From this recurrent budget, 542 billion Birr is directly allocated for domestic and foreign debt servicing; 236.4 billion Birr is allocated for fertilizers, fuel subsidy compensation and to increase the capital of the Ethiopian Petroleum Enterprise; and 170.8 billion Birr is budgeted for the execution of salaries, allowances and various administrative payments of government budgetary institutions.
It is noted that the overall macroeconomic calculation for the 2019 fiscal year proactively factors in the potential negative impacts that the continuous global warfare, particularly in the Middle East, could inflict upon supply chains and fuel prices. To support this budgetary demand, the total revenue to be collected by the federal government during the fiscal year is projected to be 1.817 trillion Birr. Within this revenue plan, the lion’s share, amounting to 1.6 trillion Birr, is approved with the plan to be collected directly from tax and non-tax domestic revenues. Here, Enderasie, just like its previous year’s edition, has chosen to look beyond the details of this upcoming year’s budget to survey its surrounding dimensions; furthermore, acknowledging that the upcoming new House of Peoples’ Representatives holds the constitutional responsibility to monitor the execution and planned performance of this budget, we have included policy recommendation points that we believe hold value.
What Will Finance the Budget?
In the new 2019 fiscal year, the federal government plans to collect a total revenue of 1.817 trillion Birr, and the Ministry of Finance announced that this revenue plan reflects a 17.4 percent growth compared to the total revenue estimated to be collected in the 2018 fiscal year. As the Minister of Finance, Ahmed Shide, stated during the presentation of the budget explanation to the House of Peoples’ Representatives, it is planned to collect 88.7 percent of the total budget of the 2019 fiscal year from tax and non-tax revenues. To make this tax revenue plan successful, extensive preparations have been made to rigorously implement reforms undertaken regarding tax policy and tax administration, tax digitalization and the excise stamp system.
It is noted that the net fiscal deficit established for the 2019 fiscal year aligns with the goal set by the government to create a stable financial ecosystem through its comprehensive macroeconomic reform. Recorded as a major shift within this context, the government has completely halted its borrowing from the National Bank for fiscal deficit financing, which is said to have provided significant support in lowering inflation to a single digit. In addition to this, it is mentioned that several changes strengthening the modern monetary policy are being recorded due to the implementation of the National Bank’s policy interest rate and the Minister was heard stating that initiatives launched to make this policy sustainable will continue in a strengthened manner. The macroeconomic reform holds a prominent share in stabilizing inflation and it is stated that the government will reinforce its support for low-income segments of society by allocating a proportional subsidy budget for cooking oil, basic commodities, as well as medicines. On the basis of these structural measures, an economic growth of 10.1 percent is projected to be recorded in the upcoming 2019 fiscal year, and it is noted that the industrial, service and agricultural sectors will hold the highest shares for this growth.
The budget preparers plan to cover 424.2 billion Birr (74.7 percent) of the capital budget from domestic treasury financial sources. Correspondingly, foreign aid contributed 112.6 billion Birr, while foreign loans amounted to 30.9 billion Birr. Accordingly, while the domestic treasury executes debt servicing and financially supports budget allocations to regions, it has also primarily carried most of the development program expenditures. Total foreign aid reached 204.8 billion Birr and total foreign loans reached 193.7 billion Birr; this fully incorporates the 162.8 billion Birr budget support obtained directly from the International Monetary Fund, the World Bank, Italy and France. In connection with this same foreign financing source, the World Bank announced on June 18, 2018 its decision to approve a 1.45 billion Dollar budget support to the Ethiopian government. Recall that this new support is a financial source that came following the previously allocated 17 billion Dollar loan and debt service relief support allocation to the country.
The Loan and the Budget
Out of the 2.34 trillion Birr budget scale prepared by the federal government for the upcoming 2019 fiscal year that begins in the month of July, 542.1 billion Birr has been allocated to be used for domestic and foreign debt servicing. This monetary amount has surged by around 79 billion Birr compared to what was allocated for the same purpose in this year’s fiscal year. Among the main issues stated to have been taken into account when this budget was prepared, it is noted from the budget explanation document presented to the House that the potential domestic loan pressure in 2019 is one. For this reason, the budget explanation volume distributed to the members of parliament indicated that the budget, when prepared, took into account domestic and foreign debt servicing. It is also explained that the issue of debt servicing was taken into account when preparing the details of the recurrent expenditure, which holds the highest share of the 2019 budget. From this perspective, holding the leading share within the recurrent expenditure at 43.3 percent is the 542.1 billion Birr allocated for domestic and foreign debt servicing. This monetary amount, which has surpassed half a trillion Birr, reflected a 17 percent increase when compared to what was budgeted for the same purpose this year; the monetary amount allocated for foreign debt servicing in the 2019 fiscal year is 293.3 billion Birr, while that held for domestic debt is 248.7 billion Birr.
Previous data indicates that at the end of the 2017 fiscal year, the total debt of the Ethiopian government was 52.75 billion Dollars. Recalling that 64.4 percent of this was foreign debt, although Ethiopia’s foreign debt stock showed a slight decrease during the 2014 to 2015 fiscal years, it exhibited an increase in the 2017 fiscal year. Information obtained from the Ministry of Finance indicates that the increase was recorded because the inflow of foreign resources obtained in the form of budget support during the fiscal year grew. Documents surveyed by Enderasie also show that the reasons for the increase were primarily the release of concessional loans from Ethiopia’s development partners, particularly the IMF and the World Bank, to support the implementation of the macroeconomic reform. Following this, the foreign debt stock, which stood at 29.6 billion Dollars at the end of the 2016 fiscal year, rose to 34 billion Dollars at the end of the 2017 fiscal year. Regarding the domestic debt stock, its share had been increasing from year to year, and although the share that domestic debt held out of the total debt stock at the end of the 2016 fiscal year was 57.4 percent, numerical data obtained from the Ministry shows that this high share dropped down to 35.6 percent at the end of the 2017 fiscal year. Cited as the reason for this is the foreign exchange transaction system reform implemented in the 2017 fiscal year, and the reform significantly depreciated the exchange rate of the Birr against transaction currencies such as the Dollar.
The most recent information regarding how much Ethiopia’s domestic loan is comes from the nine-month plan execution report presented a short while ago by the Ministry of Finance to the House of Peoples’ Representatives. According to that report, Ethiopia’s total foreign and domestic loan up to March 22, 2018 reached 51.8 billion Dollars. While the foreign loan holds a share of 33.5 billion Dollars, the remaining 18.3 billion Dollars became the domestic loan. Out of the domestic loan, the federal government holds the highest share, amounting to 17.5 billion Dollars and according to the Ministry’s report, the remaining 800 million Dollars is what state-owned enterprises borrowed from the National Bank. The Ministry’s report noted that one of the measures that caused the government’s domestic loan to increase was the Ministry of Finance issuing a 10-year bond and taking over the Commercial Bank of Ethiopia debt that state-owned enterprises owed. It is recalled that it was in October 2017 that the 845.3 billion Birr debt of state-owned enterprises, including the 263.3 billion Birr that Ethiopian Electric Power borrowed from the Commercial Bank, was converted into long-term bonds. These debt instruments, issued through a proclamation approved by the House of Peoples’ Representatives, are to be fully paid off within a 10-year period after a three-year grace period and they also bear an interest determined by the agreement of the Ministry of Finance, the National Bank of Ethiopia and the Commercial Bank. In the explanation presented by the Ministry of Finance to the House of Peoples’ Representatives, it was shown that up to March 30, 2018, the government had borrowed 492.3 billion Birr through Treasury bills and 2.2 trillion Birr through long-term bonds and Treasury bonds. In total, the government’s domestic loan reached 2.7 trillion Birr, and when the 125.8 billion Birr loan of state-owned enterprises is added to it, the total domestic debt reached 2.8 trillion Birr.
In this upcoming year’s budget, following debt servicing, the allocation set in second place is the 238.1 billion Birr designated for budget subsidy. The education sector, which held the fourth position in the 2018 budget allocation in terms of its allocated monetary amount, has risen to the third position in the 2019 fiscal year, and the expenditure amount set for the education sector in the upcoming year has become 158.2 billion Birr. Conversely, the 124.4 billion Birr set for contingency expenditure is positioned in fourth place. Holding the fifth position in the 2019 fiscal year is road construction expenditure, and the monetary amount allocated for roads for the upcoming year has become 123.8 billion Birr. Although the monetary amount allocated for the sector has risen by 28.8 billion Birr compared to this year’s, it brought no change to its fifth-place ranking held in 2018.
Has the Budget Inflated?
Regarding this 2019 budget that has surpassed two trillion Birr, one of the discussion points that can be raised seems to be: has the budget actually inflated? As we have mentioned above, when the budget is weighed against the debt burden Ethiopia bears and the obligations it is expected to pay, as well as against the development demands required particularly to enhance production and productivity to improve the livelihoods of its citizens, alongside existing inflation and the weakening of the purchasing power of the Birr, it has raised the question of whether it is as massive as its numerical figure suggests. To measure the healthiness of this budget scale, various metrics are utilized among economists.
The first metric is the fiscal deficit; even though the Ethiopian economy says it will spend a full 2.34 trillion Birr during the fiscal year, since what it can collect is only around 1.8 trillion Birr, it will face a deficit of around 522 billion Birr in between. When measured by this difference, given that the established metric of the Ethiopian economy is a net fiscal deficit of 1.3 percent, the argument holds water that this number cannot be said to be massive for an economy that desires to grow significantly.
The second metric is the rate at which the budget has grown; despite the high inflation present in the Ethiopian economy, the budget has currently grown by 21 percent from last year to this year. When we look at the net value, since inflation erodes the value of money, if it is said that the gross growth has increased by 21 percent and if inflation is said to be 13 percent, because the difference is around 8 percent, the net growth is considered to be 8.1 percent. At present, beyond the fact that the purchasing power of money within the Ethiopian economy has weakened significantly, many of Ethiopia’s development projects also require foreign currency; thus, to execute the same project this year that was built last year, since products are imported from abroad, a vast amount of Ethiopian Birr becomes necessary to accomplish this. When we attempt to look at it from another angle linked to this same issue, we arrive at a similar conclusion; if this 2.34 trillion Birr is calculated in Dollars (at the exchange rate of 160 Birr existing when we prepared this survey), it amounts to around 14.9 billion Dollars and since this reflects an increase of no more than five percent when viewed in Dollars, it makes it difficult to call the budget inflated.
On the other hand, beyond the fact that the economy carries a high loan debt, since half a trillion from the allocated budget is returned to pay off debt, it can also be observed that what remains after that calculation is not a budget that can be called large. If it is an economy that carries a vast amount of debt, holding a large budget is made mandatory by numerical logic in order to execute regular operations, perform capital works, subsidize what needs to be subsidized and alleviate the debt from within that budget. Given that this economy carries half a trillion in debt, when 542.1 billion Birr is subtracted for debt from the 2.34 trillion Birr, we see that it is an economy that balances what it brings in as revenue and what it spends. For this as well, even if the federal government says it will collect 1.817 trillion Birr, since its total expenditure is 1.8 trillion Birr, it will utilize the remaining revenue to pay the debt it owes rather than assigning it to other new development works. Therefore, the fact that the budget can rise when there is a massive debt makes it difficult to say it is exaggerated.
Indeed, the perspective that suggests this 2019 budget is exaggerated appears to stem from a monetary economics argument related to the weakening of the purchasing power of the Birr. From this viewpoint, the reason this very budget appears significantly higher compared to last year’s is primarily that it indicates a decline in the purchasing power of money. Looking at it in terms of the Birr, as this year’s budget shows an increase of around four billion Birr, it can be observed that the Birr itself is not a sound benchmark for the budget. Even so, it is necessary to recall that inflation and the increase in federal government expenditure have, at the very least, been the primary contributors to the substantial rise in the budget.
A Comparison of the Figures
To look at this budget properly, making various numerical comparisons will provide us with a broader perspective; when we partially compare it with previous years, we get the following numerical insights.
The budget allocated by the federal government has expanded rapidly when calculated in Birr. It grew from 562 billion Birr in the 2016 fiscal year, to 971 billion Birr in 2017, and further to 1.93 trillion Birr in 2018; this reflects an average annual growth rate of 51 percent. Since foreign currency is considered a stronger benchmark, when we first calculate the budget scale in Dollars to examine the economic reality, the budget appears to have grown massively when viewed in Birr, but its growth registers as very minimal when calculated in Dollars. The budget allocated for the 2018 fiscal year was 1.93 trillion Birr, and since it is 2.34 trillion Birr this year, it shows a massive growth when viewed in Birr. However, while the budget shows a 21 percent growth when viewed in Birr, it has grown by only 3.5 percent in Dollars. As we have previously mentioned, this demonstrates that the purchasing power of the Birr has weakened significantly.
During the past month of June, the average price of one US Dollar was around 135.5 Birr (with a low of 133 and a high of 137 Birr). If we base our calculations on the exchange rate of 137 Birr that existed after the budget was approved and convert last year’s 1.93 trillion Birr into Dollars, we can understand that the budget stood at 14.1 billion Dollars. When we calculate the budget setting the exchange rate at 160 Birr, the upcoming year’s budget amounts to around 14.6 billion Dollars. This means that although the budget appears to have increased by 410 billion Birr in terms of monetary volume in Birr, it has grown by only 500 million Dollars when calculated in Dollars.
Looking back a little further leads us to a similar conclusion. Since the 2013 fiscal year, the budget has shown a 480 percent increase when measured in Birr. In contrast, when converted into US Dollars, the growth rate is extremely minimal, with the observed increase being only 8 percent. The discrepancy between the two currencies is recorded as highly significant; the federal budget, which stood at 476 billion Birr in the 2013 fiscal year, has reached 2.3 trillion Birr for the 2019 fiscal year.
When we look back and review the growth trajectory since the 2013 fiscal year, we find these numbers: it was 476 billion Birr in the 2013 fiscal year, 561 billion in 2014, 786 billion in 2015, 801 billion in 2016, and 971 billion Birr in 2017. Continuing this expansion, it has reached 2.3 trillion Birr for the 2019 fiscal year. Conversely, when measured in Dollars, the budget showed only a minor change, growing from 13.6 billion Dollars in the 2013 fiscal year to only 14.9 billion Dollars in the 2019 fiscal year.
To serve as another point of comparison for the budget, let us look briefly at the subsidy that has been given to the regions over the past fiscal years.
In the budget prepared by the federal government for 2019, the amount of financial subsidy allocated to the 12 regions and two city administrations has crossed half a trillion Birr for the first time. Within this financial support, although the Addis Ababa City Administration; which had been excluded from the subsidy list last year, has been reintegrated, the amount of money allocated to it does not even reach a quarter of a billion Birr. The amount of financial support allocated to the administration in the 2019 fiscal year is only 74.53 million Birr, whereas the subsidy allocated to it in 2017 was 5.45 billion Birr and 5 billion Birr in the 2016 fiscal year. Out of the regional support set aside for the upcoming fiscal year, the highest amount is allocated to the Oromia region, while the Amhara and Somali regions are positioned in second and third place regarding the amount of subsidy they receive. The support allocated to the Oromia region for the 2019 fiscal year is 179.35 billion Birr, whereas 108.4 billion Birr had been allocated to it in the 2018 fiscal year. Similarly, the Amhara region has continued to receive the second-highest amount of support obtained from the federal government. The Amhara region’s federal subsidy for the 2019 fiscal year is 112.4 billion Birr, which reflects an increase of 22.15 billion Birr compared to the 90.25 billion Birr it had in the 2018 fiscal year.
In third place stands the Somali region; the subsidy money allocated to the region for the 2019 fiscal year approaches 52 billion Birr, and this subsidy amount is greater by 20 billion Birr than the subsidy allocated to the region in this year’s fiscal year. Positioned in fourth and sixth place are the South Ethiopia and Central Ethiopia regions; the two new regions entered the budget details for the first time in the 2017 fiscal year, during which the South Ethiopia region was allocated 15.2 billion Birr in support money, while 12.8 billion Birr was budgeted for the Central Ethiopia region. Two years later, the subsidy allocated to the South Ethiopia region has more than doubled, reaching 36.5 billion Birr, while the support for Central Ethiopia has similarly entered 30.9 billion Birr. Positioned in fifth place within the regional support distribution is the Tigray region, and the support money allocated to it for the upcoming 2019 fiscal year has become 31.3 billion Birr. This subsidy amount is higher by 12.4 billion Birr than the subsidy allocated to the region this year.
Speaking on this same matter, the Minister of Finance, Ahmed Shide, noted that his government is still implementing the old budget formula, which does not fully reflect the new regional organization. He was also heard stating that, even now, the center of focus is on making payments to finalize and hand over projects that are currently under construction, rather than launching new ones.
The Macroeconomy at a Glance
The Minister of Finance, Ahmed Shide, stated on Thursday while presenting the 2019 federal government draft budget to the House of Peoples’ Representatives that integrated fiscal and monetary policy reforms are yielding rapid growth and low inflation. According to the Minister’s explanation, Ethiopia’s macroeconomic reform has registered results that place the country among the fastest-growing economies in the world and have significantly stabilized inflation.
Ethiopia’s 2019 fiscal year budget narrates a grand ambition visible amid complex shortages. The government has planned 2.339 trillion Birr, reflecting a registered high increase of 21.3 percent compared to last year’s 1.93 trillion Birr budget; conversely, a total of 1.817 trillion Birr is expected to be collected from domestic revenue, aid, and budget support. Since the net fiscal deficit of 522 billion Birr between the two amounts to 1.3 percent when calculated against the country’s Gross Domestic Product (GDP), the argument holds that this number cannot be considered massive for an economy that desires to grow aggressively. However, the primary challenge lies not within the size of the fiscal deficit, but rather in the reality the budget reveals regarding the narrow room the government has to maneuver freely.
Currently, debt servicing has become the single largest expenditure category. The debt servicing stands at 542.1 billion Birr (293.3 billion Birr for foreign and 248.7 billion Birr for domestic debt), which has swallowed about 43.3 percent of the total recurrent expenditure. This means that before the government builds roads, supports schools, or makes sub-budget allocations to the regions, it has caused the majority of its financial resources to be locked down for debt beforehand. Therefore, although the budget appears expansionary when viewed as a whole, it has become highly constrained in its internal substance.
The structure of the expenditure further reinforces this very point. While 1.236 trillion Birr (52.9 percent of the budget) is allocated for recurrent expenditure, 568.2 billion Birr (around 24.3 percent) is assigned for capital expenditure; this has made it focused on finalizing existing projects rather than supporting new initiatives. It is well known that while recurrent expenditure keeps the government structure operational (ranging from paying salaries to providing subsidies for basic commodities like fertilizer and fuel), capital expenditure, in contrast, expands future production capacity. From this perspective, we can understand that the budget focuses on easing today’s social and debt pressures rather than building tomorrow’s long-term growth. On the revenue side, this compels the government to demand more from the economy.
Out of the federal government’s revenue plan, 1.6 trillion Birr is planned to be collected directly from tax and non-tax domestic revenues. Reforms such as value-added tax, tax digitalization, and the excise stamp system are aimed at strengthening domestic resource mobilization capacity. Since Ethiopia’s tax base remains narrow, the government needs revenue to reduce its dependency on borrowing; however, it is not difficult to see that this burden carries the risk of placing pressure on the consumer public.
When looking at the circulation of the Birr, the National Bank of Ethiopia has restricted broad money growth, and this measure of strictly controlling the money supply has become a fundamental pillar of the reform strategy. In addition to this, Ethiopia has completely stopped covering its federal fiscal deficit through direct advances from the central bank; by halting direct central bank financing, this action is said to have provided significant support in bringing inflation down to a single digit.
The Minister of Finance appreciated the strategic interventions made in various sectors regarding alleviating the pressure of the cost of living; although he stated that the government will strengthen its support for low-income segments of society by allocating a proportional subsidy budget for cooking oil, basic commodities, and medicines, looking at these subjects from the perspective of social development offers another viewpoint.
From a political context, the most sensitive and concerning sign seems to be the weakening share of expenditure allocated for poverty reduction and social development. Even though this expenditure continues to grow in nominal terms, its relative share within the overall budget structure has been declining. This appears to be the central tension of the budget; that is, although Ethiopia plans to budget a massive amount of money at the planning level, circumstances have forced a tightening of the net capacity utilized for programs directly linked to direct poverty reduction, social services and development priorities. Therefore, this budget is not merely an expression of expenditure; rather, it appears to plunge the government’s strategic choices and obligations into a dilemma of trade-offs. Beyond the fact that debt servicing; which has taken the lion’s share; severely restricts the government’s freedom of flexibility, while salaries and administrative recurrent obligations are soaring on one hand, the share of capital expenditure that lays the foundation for tomorrow’s sustainable growth has conversely thinned out. To hold this compelling budget structure together as one, it seems inevitable that the government is forced to place its dependency almost entirely on robust domestic tax collection.
Thus, while the main nominal budget figure indicates the existence of an expansionary government budget, the deeper internal message appears more concerning; namely, although Ethiopia has a lot of money to allocate, it raises fears that its policy choice freedom regarding how it distributes that money according to national priority needs will be extremely minimal.
BRIDGE’s Policy Recommendations
Following the approval of the federal government budget for the 2019 fiscal year, it is clear that the House of Peoples’ Representatives has a constitutional responsibility to rigorously monitor and oversee the budget execution, policy goals, and the potential side effects they may cause on the economy. In light of the analyses, we have presented above, our organization, BRIDGE, wishes to put forward the main key points and recommendations that it believes the House should focus on as follows:
· The Risk Posed by Tax Reforms on Investment Inflow and
Job Creation:
The
government plans to collect up to 78.9 billion Birr in new domestic revenue
overall by abolishing tax holidays and duty-free import privileges. However, we
believe that this measure requires close monitoring by the House as it may
bring about the following challenges:
A.
Weakening of Investment Incentives:
Although it
is planned to generate up to 22 billion Birr in revenue simply by reducing
incentives from certain sectors and bringing them into mainstream taxation,
there is a concern that this practice might stifle new investment inflows and
diminish the expansion capacity of the manufacturing sector.
B.
Decrease in Job Creation:
Since tax
holidays are directly linked to domestic production growth and job creation,
when the incentives are reduced, the rate of job creation may simultaneously
shrink.
From this
perspective, we wish to strongly emphasize that the House of Peoples’
Representatives should firmly oversee; through its existing institutional
accountability mechanisms, that when the Ministry of Finance expands the tax
base, it does so without causing long-term damage to the manufacturing and
industrial sectors and that the incentive management frameworks remain properly
aligned with the macroeconomic plans set out by the federal government.
· Capital Budget Utilization and Project Prioritization:
–
The 568
billion Birr capital budget allocated for the 2019 fiscal year is positively
noted for being well-studied and uninflated. Aiming to finalize and commission
existing projects that are underway and incomplete; rather than launching major
new projects, is a fiscal practice that can be cited positively. However, it
cannot be denied that this measured capital budget needs to focus exclusively
on infrastructure essential to the public, particularly those that directly
enhance production and productivity. From this perspective, beyond ensuring
that this 568 billion Birr budget is strictly utilized for finalizing existing
projects and that new, unstudied expenditures do not arise, we believe it is
necessary to remind the House of Peoples’ Representatives to rigorously oversee
the respective executive bodies legally responsible for the development
projects expected to be completed.
· Concerns Over Additional Inflation and Foreign
Currency Competition: –
It cannot
be denied that the government’s large-scale spending process could create an
opportunity to push back the ongoing efforts to curb inflation by driving up
aggregate domestic demand. Although many projects are launched using domestic
revenue, it is well known that the machinery and inputs required for their
execution must be purchased from overseas using Dollars. From this perspective,
running numerous projects simultaneously raises the risk of creating a new wave
of competition with the government over the market’s tight foreign currency
supply. Since the interplay between these two phenomena is known in economic
theory to carry heavily negative mutual consequences, we wish to remind the
House to maintain rigorous oversight on this specific issue when institutions
tasked with overseeing the macroeconomy (such as the National Bank and the
Ministry of Finance) present their quarterly and semi-annual performance
reports.
· Debt Burden and the Risk of Money Printing: –
It is well
known that the government has incorporated overseas loans and aid into its plan
to fill the fiscal gap. Although the support and aid expected to come through
this channel will be a major help in narrowing the budget deficit, it is
inevitable that it will increase the country’s debt burden. From this
perspective, concerns are being raised that when the government issues treasury
bills to cover its budget deficit, the supply of credit available to the
private sector might dry up and domestic banks could face liquidity strain.
Linked to this, it cannot be denied that there is a critical need to strictly
monitor that direct advances from the central bank remain completely halted and
that the macroeconomic stability achieved by not printing money is not
reversed. The reason for this is that if the government fails to secure this
foreign debt and aid in sufficient amounts, it could lead to two dangerous
alternatives to close the gap; first, issuing an excessive volume of government
treasury bills, during which time the government would absorb all available
credit in the market for itself, leaving the private sector starved of loans
and impoverishing the market. Second, it could follow that the government is
forced into an unavoidable option where it compels the national bank to print
money directly. This, in turn, is bound to plunge the macroeconomy back into a
worse cycle of hyperinflation. Therefore, we argue that the House of Peoples’
Representatives must use its constitutional oversight authority to exercise
strict control over the Ministry of Finance and other directly concerned
institutions during the upcoming budget months.