Event
This panel discussion is taking place as part of the Ethiopian Economic Association's (EEA) 23rd International Conference on the Ethiopian Economy
Start Date: 17th July 2026 - 2:00 PM
End Date: 17th July 2026 - 3:30 PM
Time zone: East Africa Time (GMT+3)
Type: Conference
Location: Addis Ababa, Ethiopia
In recent years, global development financing has entered a new era of structural change, with flows to low-income countries slowing substantially amid global shocks. For a long time, Official Development Assistance (ODA) has been a key source of financing especially for Sub-Saharan African countries. [1] In 2025, ODA from Development Assistance Committee (DAC) members and associates fell by roughly 23% — the steepest single-year contraction on record — with bilateral aid to sub-Saharan Africa dropping between 16% and 28%. [2] This dynamic calls on governments in low-income countries, such as Ethiopia, to strengthen their efforts to mobilize domestic resources to finance their development agendas.
For Ethiopia, this dynamic reinforces the government's ongoing efforts to reduce reliance on external financing and strengthen revenue collection after a period of disappointing revenue growth. Despite sustained high growth, Ethiopia's tax-to-GDP ratio fell from a peak of around 12.4% in 2014/15 to roughly 6.2% in 2023/24 — no other country in the world experienced such a large relative decline in its tax-to-GDP ratio over this period. [3] This left Ethiopia among the lowest in sub-Saharan Africa, well below regional peers such as Kenya, Rwanda, and Uganda, and well below the 15% threshold widely associated with achieving stronger institutions, deeper financial markets, and sustainable economic growth. [4]
However, there has since been a major reversal over a remarkably short period of time. Between 2023/24 and 2025/26, the tax-to-GDP ratio increased from 6.2% in 2023/24 to 7.8% in 2024/25 and expected to reach around 9.1% by 2025/26. [5] This reversal can be attributed to the combination of several coordinated tax policy and administrative measures: the July 2024 exchange-rate liberalization, which roughly doubled customs revenues within a year; a new VAT reform narrowing exemptions; income tax reforms, including the introduction of a minimum alternative tax on business turnover to curb under-reporting; and administrative modernization through e-filing and integrated digital platforms, as set out in the National Medium-Term Revenue Strategy (NMTRS) and the broader Homegrown Economic Reform agenda. [6]
The question this panel takes up is how to sustain and build on this momentum so that domestic revenue becomes a reliable source of financing for development amid declining external financing — without compromising the tax system's fairness, undermining investment, or eroding the social contract between citizens and the state.
Opening Remarks
Panel Discussion
Chair & Closing Remarks
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[1] IMF, “Aid Is Falling Fast. What Can African Countries Do?” IMF Blog, June 22, 2026, https://www.imf.org/en/news/articles/2026/06/22/aid-is-falling-fast-what-can-african-countries-do.
[2] OECD, “A Historic Decline in Foreign Aid: Preliminary 2025 ODA Data,” OECD Data Insights, April 9, 2026, https://www.oecd.org/en/data/insights/data-explainers/2026/04/a-historic-decline-in-foreign-aid-preliminary-2025-oda-data.html.
[3] Vedanth Nair, David Phillips, Edris Seid, Ben Waltmann, Mulay Weldu and Muhammed Osman, Ethiopia’s Tax-to-GDP Ratio: Benchmark Estimation and Performance Analysis (Institute for Fiscal Studies/TaxDev, in collaboration with the Ethiopian Ministry of Finance, July 2025), https://www.mofed.gov.et/media/filer_public/26/ab/26ab5609-5c4e-4c0b-9cd1-fd12588e11fa/taxtogdp_publicationversion_07_2025_withforeword.pdf.
[4] IMF, Building Tax Capacity for Growth and Development: Evidence-Based Analysis for Mobilizing Domestic Revenue, IMF Departmental Paper (Washington, DC: IMF, October 2025), https://www.imf.org/-/media/files/publications/dp/2025/english/btcgdea.pdf
[5] IMF, The Federal Democratic Republic of Ethiopia: Fourth Review Under the Extended Credit Facility Arrangement, Request for Modification of Performance Criteria, and Financing Assurances Review, IMF Country Report No. 26/20 (Washington, DC: IMF, January 2026), https://www.imf.org/-/media/files/publications/cr/2026/english/1ethea2026001-source-pdf.pdf.
[6] FDRE, Ministry of Finance, National Medium-Term Revenue Strategy: FY 2024/25 to FY 2027/28 (Addis Ababa: Ministry of Finance, October 2024), https://www.mofed.gov.et/media/filer_public/9f/13/9f13f33f-afdc-41cc-88ae-b8914e96b7ab/nmtrs_final__2024_english_version.pdf
