Monetary policy is a central banks actions and communications that manage the money supply. Public finance and taxation in ethiopia pdf in a moment of dismissive hubris, the ethiopian tax system may be. In view of the foregoing, it is no wonder that the ethiopian national defense forces endf numbers about 200,000 personnel, which makes it one of the largest militaries in africa. Pdf the macroeconomic effects of fiscal policy shock in ethiopia. Macroeconomic policy fiscal and monetary policy ethiopias current fiscal policy objective is to achieve public debt sustainability and maximise the efficient use of highly concessional resources for poverty. Economic policy analysis this site presents an analysis of the ethiopian governments economic policies compared to a revised list of 34 economic policies as prepared by student serkalem tekletsadik with the mckeever institute of economic policy analysis miepain december 20. Variations in the inflation rate can have implications for the fiscal authoritys. Pdf this paper investigated the macroeconomic effects of fiscal policy shocks in ethiopia using a bayesian vector auto regression model. Linkages between public sector revenues and expenditures in developing countries iii table of contents acknowledgements ii abbreviations iv 1 introduction 1 1.
If fiscal variables affect the real demand for money, the equilibrium price level will also depend on fiscal factors. The fed implements monetary policy through open market operations, reserve requirements, discount rates, the federal funds rate, and inflation targeting. The main objective is to synthesize complex budget information so that it is easily understood by stakeholders, and to put forth key messages to inform policy and financial decisionmaking processes. Furthermore, var granger causality test suggests the causation running from budget deficit to money supply. There is a fixed budget calendar which allows sector bureausoffices sufficient time to process their. Available data for fy q1 20192020 suggests resilience. The current ethiopian government policy strategy is in line with the former. Ethiopia s government goal is to alleviate poverty via fast economic growth. The macroeconomic effects of fiscal policy shock in.
Inflation reemerged in 2012 and reached a peak of about 40 % in september. Fiscal policy means the use of taxation and public expenditure by the government for stabilisation or growth. The most important of these forms of money is credit. Editor, ethiopian economic associationeea, departments of economics of aau. The final section draws concluding remarks and highlights areas for policy actions. A dynamic cge framework analysis lulit mitik mpia3 agriculture, privatization. The impact of fiscal policy shocks on ethiopian economy grin.
Ethiopias foreign affairs and ational security policy. Linkages between public sector revenues and expenditures. Apr 10, 2020 the three objectives of monetary policy are controlling inflation, managing employment levels, and maintaining long term interest rates. To order copies of macroeconomic policy and structural transformation of african economies by the economic commission for africa, please contact. This booklet is the product of the common effort of the ethiopian bds network ebdsn supported by. Monetary policy is still considered expansionary, which is unusual at this stage of an expansion, and is being coupled with a stimulative fiscal policy larger structural budget deficit. Fiscal policy, public debt and monetary policy in emes. Nbe has adopted a further tightening of the monetary policy stance which. Real interest rates are largely negative, as the minimum bank deposit rate of 5%, bond yield of 3. Agricultural development led industrialization adli put forward in 1993, is the governments chosen growth strategy to realize its goal. Based on information available at the time of these discussions, the staff report was completed on august 30, 2016. Fiscal policy, public investment and economic growth in ethiopia.
The external current account deficit narrowed to 6. It is therefore worth clarifying the ethiopian tax system and the rationales behind for the business owners through the relevant institutions that have access to and ability to understand this booklet. The country needs to define and prioritize the specific objectives of its regulations in the supervision laws clearly and the nbe needs to link its directives and. Ethiopian economic association eea primary descriptors. Fiscal space in africa, as measured by a debt threshold of 40 per cent of gdp 2016201836 figure 2. Edhs ethiopian demographic and health survey efy ethiopian fiscal year ehnri ethiopian health and nutrition research institute eid early infant diagnosis emtct elimination of mothertochild transmission of hiv ephi ethiopian public health institute epp estimations and projections package fbos faithbased organizations fgm female genital. Use the free adobe acrobat reader to view this pdf file. The role of trade and foreign investment in this process, and particularly the role of trade and investment policy liberalization, has been much disputed. Federal government of ethiopia ministry of finance and. In recent years, the fiscal policy measures of the government has mainly.
All trademarks and s on this website are property of their respective owners. Fiscal policy can be used as tool of sustained growth and a means to. This study examines the impacts of fiscal policy shock on ethiopian economy. The current state of ethiopian financial sector and its regulation. Ethiopias current fiscal policy objective is to achieve. Oct 10, 2018 the main features of fiscal aggregates of ethiopia suggest that either the government is not willing to fundamentally change its fiscal policy stance or the fiscal system is governed by the structural features of the economy that are not easily amenable to change in response to fiscal policy reforms. This study decomposes government revenue and government expenditure into various broad categories and then estimates the impact of each of them on economic growth for ethiopia using 196061. According to cristina and michaela 2009, fiscal policy is defined as the deliberate manipulation of government income and expenditure to achieve economic and social objectives and sustain the countrys growth. Monetary policy and inflation dynamics in ethiopia. The money supply includes forms of credit, cash, checks, and money market mutual funds. Introduction during the 1980s and 1990s, the vulnerability of emes to shocks was often exacerbated by high fiscal deficits, underdeveloped domestic bond markets, and largecurrency and maturity mismatches. To combat inflation and reduce the deficit, the government adopted a conservative fiscal management policy in the 1980s. Fiscal policy in ethiopia ethiopian economic association.
Features, roles and functions of fiscal policy in ethiopia fiscal policy is one of the major macroeconomic policies in which a government uses its spending and taxation powers to monitor and influence a nations economy. Among the most important is the recognition that fiscal and monetary policies are linked through the government sectors budget constraint. The document listed below will be separately released. Fiscal policy for financing sustainable development in africa viii list of abbreviations aaaa addis ababa action agenda afcfta african continental free trade area ardl autoregressive distributed lag au african union beps base erosion and profit shifting report of the organisation for economic cooperation and development. Fiscal policy, public debt and monetary policy in emerging. In ethiopia the year 1991 marked the end of the previous policy regime of hard control that had lasted for nearly two decades. The main features of fiscal aggregates of ethiopia suggest that either the government is not willing to fundamentally change its fiscal policy stance or the fiscal system is governed by the structural features of the economy that are not easily amenable. The main features of fiscal aggregates of ethiopia suggest that either the government is not willing to fundamentally change its fiscal policy stance or the fiscal system is governed by the structural features of the economy that are not easily amenable to change in response to fiscal policy reforms. A majority of the banking services were concentrated in major urban areas, although there were efforts to establish more rural bank branches throughout the country.
Within the governments mediumterm economic programme, fiscal policy stresses two main objectives. Addis fortune, bank borrowing, csa, ethiopian television, fiscal policy, food inflation, halfyear report on government performance, headline inflation, meles zenawi, monetary policy, monthly inflation data, narrow tax base, national bank of ethiopia, parliament. Fiscal policy, inequality and the poor in the developing world. According to culbarston, by fiscal policy we refer to government actions affecting its receipts and expenditures which we ordinarily taken as measured by the governments receipts, its surplus or deficit. Pdf the current state of ethiopian financial sector and. It derives its nature and characteristics from constitutional provisions as well as end page 112 the state of economic development, the pattern of income and resource. An economic analysis of fiscal federalism in ethiopia abu girma moges abstract.
The transition and emerging market countr ies of asia, latin america and africa have also tried to target their banking an d insurance policies an d regulations at the aforementioned types of monetary and financial policy objectives although with difference on prioritization. An economic analysis of fiscal federalism in ethiopia. First, equilibrium requires that the real quantity of money equal the real demand for money. There are two ways fiscal policy might matter for the price level. The national bank of ethiopia regulated currency, controlled credit and monetary policy, and administered foreigncurrency transactions and the official foreignexchange reserves.
Chapter two will introduce the students to the income tax in ethiopia. The theory of fiscal federalism fiscal federalism refers to a process of distribution and redistribution of fiscal decisionmaking power across multilevel governments. A key to teaching quality at the center of the storm. The government limited the budget deficit to an average of about l4 percent of gdp in the five years ending in efy l98889 by borrowing from local sources. Average ratio of taxes to gdp in africa by fiscal policy stance, 20102015 37 figure 2. Uvadare digital academic repository financial market. Agricultural development led industrialisation adli is a central pillar of economic policy in the recently completed plan for accelerated and sustained development to end poverty pasdep and the soontobe launched five year growth and transformation plan fygtp. Efy ethiopian fiscal year egs employment generating schemes ehnri ethiopian. A dynamic cge framework analysis revised title public spending, adli, and alternative scenarios for ethiopia. Fiscal policy and economic growth in ethiopia semantic scholar. Fiscal federalism is a process of redistribution of fiscal decisionmaking power in an effort to improve the performance of the public sector in resource mobilization, efficient resource allocation and in. The ethiopian government has put attractive admission and regulatory incentive schemes in place for foreign investors ethiopias admission policy has been modified more than four times in the last 22 years in favor of investors foreign investors can invest on their own or in partnership with domestic investors in areas open for fdi. Ethiopia fiscal balance economic activity gained strength in the 20182019 fiscal year, which ended in july 2019, spurred by a strong services sector and soaring industrial production.
The data released this afternoon by the central statistics agency csa indicates that year on year headline inflation rose to 36. Project muse an economic analysis of fiscal federalism. Fiscal policy is one of those different variables that determine economic growth. Mckeever institute of economic policy analysis ethiopia. The decision to cut rates in 2019 was controversial. An earlier version of this paper is presented on international conference of ethiopian economic. The information provided in this document is not official u. This was the year when the seventeenyear old socialist regime was toppled by the coalition of rebel forces, the ethiopian revolution democratic front eprdf, which formed the. In 201718 growth slowed due to political uncertainty and appropriately restrictive macroeconomic policies. Teachers and principals t he consequence of these fiscal and policy forces is the demand that schools do more with less. June 22, 2016, with the officials of the federal democratic republic of ethiopia on economic developments and policies.
The role of fiscal policy in the longrun growth process has been central in macroeconomics especially since the appearance of endogenous growth models. Constraints and objectives in an open economy1 richard m. What is new after a decade and half strategy of gradualism in reform, 20012017 working paper pdf available february 2017. Real interest rates are largely negative, as the minimum bank deposit rate of 5%, bond yield of 5. This course material discusses fiscal federalism mainly ethiopian constitution.
The macroeconomic effects of fiscal policy shock in ethiopia. Edhs ethiopian demographic and health survey efy ethiopian fiscal year ehnri ethiopian health and nutrition research institute emonc emergency obstetrics and newborn care emtct elimination of mothertochild transmission of hiv eoc emergency operations center ephi ethiopian public health institute epi expanded program on immunization. This study examines the effects of taxes and government spending on economic growth in ethiopia. Ethiopias heavy dependence on foreign aid will continue into the foreseeable future.
This was the year when the seventeenyear old socialist regime was toppled by the coalition of rebel forces, the ethiopian revolution democratic front eprdf, which formed the current government. Class sizes are up, district support for instructional. Northeast african studies, volume 10, number 2, new series, pp. In addition, the whole machinery of fiscal federalism is geared by some specific institutions which arethis effect. It may be a road, bridge, a dam, a dwelling place, an airport, a commercial building, etc. These options include imposing of taxes on businesses and persons, and nontax revenues such as service fees, money prints, loans both domestic and foreign institutions, property and investment income, privatization of public enterprises, and domestic and foreign grants. Evaluation of the ethiopian agricultural extension. Recent macroeconomic development ethiopia alemayehu geda august, 2001 paper presented at international conference on contemporary development issues in ethiopia, western michigan university, kalamazoo, michigan, usa, august 1618, 2001. In planning for the various types of construction, the methods of procuring professional service, awarding construction contracts, and. Fiscal imbalances in fdre contd vertical imbalance for example for instance, the revenue generated by the regions accounts for only a maximum of 9. Exports growth was sustained in the quarter, while public investment spending jumped by more than. Construction project a construction is a process of constructing something by man for one purpose or another. Ethiopia trade and investment priorities claudius preville.