The Fiscal Outlook, Resource Envelope and Revenue Prospect of Amhara Region, Ethiopia

Abstract

Achieving sustainable developing goals (SDGs) in Ethiopia in general and regional states such as Amhara, among other things, require for government to efficiently and adequately mobilize resource to finance tailored programs for the realization of the same. This study assesses the fiscal efficiency, resource envelope, and revenue prospects of the Amhara region. We employed the multidimensional fiscal performance index, moving average, and triple exponential smoothing methods. The data were sourced from the Finance & Economic Cooperation (BoFEC) and Plan & Development Bureaus. The findings revealed that the fiscal stance of the region is poor, characterized by a high deficit index, a low improvement index, and a low expenditure quality index. The performance of the region in non-tax revenue collection is better than in tax revenue collection. In terms of tax revenue, the great majority comes from direct sources, and the trend is expected to continue even for the next decade. Expenditures exceed revenues and the region heavily relies on subsidies from the federal government. Even though direct tax revenue is above indirect tax revenue, it never crosses the upper bound of the resource envelope. All these factors call for a proper attention of the regional government to improve its expenditure quality, widen the tax base, enhance allocative efficiency, and promote tax reforms.