Budget gives more for poverty-reduction

Ethiopia's parliament has approved a US $3.5 billion poverty-reduction budget for 2005/06 with an increase in spending of about 37 percent over the previous year, officials said on Wednesday. Almost half the budget will be raised through loans, grants and debt-relief, the government said in a statement. Some $1.9 billion will be raised through taxation and the state treasury. "The budget allocation was designed in a bid to make the poverty-reduction programme a success," state-run media reported. Ethiopia’s lower house of parliament adopted the budget late Tuesday. The budget for 2004/05 was $2.5 billion. Despite the increase in budgetary spending, Ethiopia still faces massive economic problems - almost half of its 71 million people live on less than one dollar a day. The Ministry of Finance said over the last ten years, some $8 billion in aid and loans had poured into the country from international organisations and the donor community. The money, it said, had been used for agriculture, health, food security, infrastructure and capacity building, as well as for improvements in democracy and governance. The US, Japan, Italy, Sweden, Germany and the Netherlands were among the major donors, providing some $2.5 billion to Ethiopia over the past decade. The European Union, the African Development Bank and various UN agencies had also provided an estimated $5.1 billion in loans and aid. The IMF’s Highly Indebted Poor Countries Initiative had agreed to grant some $1.9 billion in debt-relief over the next 20 years. Ethiopia was also expected to benefit from further debt-relief from the World Bank, the IMF and the African Development Bank. More than 13 percent of the country's budget is spent on debt service - twice what it spends on health care, according to government finance officials.