Ethnic Federalism in a Dominant Party State: The Ethiopian Experience 1991-2000 Lovise Aalen r 2002: 2

Total
Federal
share
Regiona
l share
Total
Federal
share
Regiona
l share
Total
Federal
share
Regiona
l share
Total
Federal
share
Regiona
l share
Total
Federal
share
Regiona
l share
Total tax revenue
3076.53
82.73
17.27
3878.77
83.1
16.82
4723.19
82.43
17.57
5322.24
81.80
18.2
5787.45
82.96
17.04
Direct tax
945.22
55.49
44.51
1311.59
59.62
40.38
1753.84
64.47
35.53
1907.58
61.32
38.68
2030.22
61.58
38.42
Income and profit tax
899.66
58.30
41.70
1230.79
63.54
36.46
1648.85
68.58
31.42
1748.16
66.91
33.09
1859.79
67.23
32.77
Indirect tax
834.14
88.19
11.81
945.55
87.02
12.98
1155.43
82.09
17.91
1720.23
81.84
18.16
1376.88
85.02
14.98
Foreign trade taxes
1297.17
99.06
0.04
1621.63
100.00
0.00
1813.92
100.00
0.00
2144.43
100.00
0
2380.35
100
0.00
Non-tax revenue
832.82
80.30
29.70
1908.34
87.73
12.27
2099.44
85.74
14.26
2024.75
81.05
18.95
2242.61
81.96
18.04
Source: World Bank (2000:20)
Table 6.5 Federal and regional shares in public expenditures in Ethiopia 1993/94 to 1997/98 (in per cent)
1993/94
1994/95
1995/96
1996/97
1997/98
Category
Total
Federal
share
Regiona
l share
Total
Federal
share
Regiona
l share
Total
Federal
share
Regiona
l share
Total
Federal
share
Regiona
l share
Total
Federal
share
Regiona
l share
General administration
690.0
47.4
52.6
922.0
41.4
58.6
1018.0
41.2
58.8
1021.0
39.3
60.7
1226.0
37.4
62.6
Defence
663.0
100.0
0.0
737.0
100.0
0.0
672.0
100.0
0.0
787.0
100.0
0.0
847.0
100.0
0.0
Economic services
2421.0
73.4
25.7
3014.0
65.8
34.2
2924.0
60.0
40.0
3597.0
63.4
36.6
4485.0
63.4
36.6
- of which (o/w) Roads
374.0
80.5
19.5
572.0
74.5
25.5
368.0
68.2
31.8
902.0
63.3
36.7
1258.0
77.6
22.4
Agriculture
565.0
43.5
56.5
529.0
29.2
70.8
659.0
27.3
72.7
551.0
9.8
90.2
848.0
28.6
73.4
Social services
1834.0
31.0
69.0
1929.0
27.7
72.3
2120.0
30.4
69.6
2364.0
25.1
75.5
2881.0
19.3
80.7
Education
998.0
24.5
75.5
1132.0
22.6
77.4
1360.0
30.7
69.3
1448.0
22.9
77.1
1683.0
20.5
79.5
Health
378.0
17.8
82.8
431.0
13.9
86.1
470.0
18.2
81.1
589.0
20.2
79.8
752.0
9.0
91.0
Other
1488.0
87.1
12.9
1791.0
85.5
14.5
1697.0
84.3
15.7
1689.0
76.3
23.7
2044.0
76.0
24.0
o/w Interests and
charges
957.0
100.0
0.0
839.0
100.0
0.0
842.0
100.0
0.0
880.0
100.0
0.0
910.0
100.0
0.0
Total expenditure
70.9
65.5
34.4
8373.0
61.7
38.3
8521.0
58.8
41.2
9458.0
56.5
43.5
11483.0
54.5
45.5

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Source: World Bank (2000:1

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The regions do not have the chance to receive any loans from international
agencies or banks directly, and cannot negotiate with international donor
agencies for grants and aid. All international deals have to go through the
federal government. The Ministry of Economic Development and Co-operation
(MEDaC) insists that such control is needed to promote equal development
throughout the federation and to prevent the most attractive regions from
receiving the bulk of international support (Interview Worku Yohalashet,
November 2000). The regions do have the right to borrow money from
domestic sources (Procl. 7/92, Art.35), but this has proved to be a cumbersome
process. The loan has to be for specific purposes and Ministry of Finance
determines each application from the regional governments by evaluating the
project’s feasibility. So far, few regions have used this opportunity, and if they
have, then only for short-term cash management purposes (World Bank
2000:33).
Horizontal imbalance – poor lowlands, wealthier ‘city states’
Considering the difference among the regional states in socio-economic
development, it is expected that the various regional governments have varying
financial capabilities and varying degrees of dependence on central transfers.
Inefficient regional governments will have difficulties with collecting revenues
and utilise regional budgets, and will thus have problems with fulfilling the
responsibilities assigned to them in the constitutions. The collection of revenues
is hampered by lack of trained manpower (both in number and qualification),
lack of sufficient and reliable information to determine the amount for each
taxpayer, and a low level of understanding by taxpayers of their obligations
and failure to pay taxes in time (Fenta Mandefro 1998: 59). According to the
previous descriptions of the federal units, it is to expect that the four lowland
regions would be those which are facing the largest obstacles in achieving
financial autonomy from the centre. The urban areas of Addis Ababa and
Diredawa should be the regions with most financial independence.
The information provided in table 6.6 largely confirms these expectations.
The table gives an overview of how much of the total expenditure of the
regions is financed by own revenues. Diredawa and Addis Ababa have a high
revenue capacity because they are the outlet in exporting and importing specific
items : 30) Apart from the special cities of Addis Ababa and Diredawa, the
regions can be divided into four groups. The first group includes Amhara,
Tigray, Oromiya, and SNNPRS, all with ratios consistently near 20-30 per
cent. The second group includes the western lowlands, Benishangul-Gumuz and
Gambella, with rations below 10 per cent. The third category has a consistently
declining ratio and includes only the Somali region. The reason why the Somali
ratio is high in the first couple of years is because of the generally low
expenditure in the region, and thus, the revenue ratio becomes high relative to
the total expenditure. The regions in the fourth group, Afar and Harari, have
very fluctuating ratios. Of all the regions, Tigray is the one which has been
most successful in increasing the share of its total expenditures which is
financed by own revenues. Although Diredawa has a high ratio, this is the
region with the largest decline in own revenues, apart from Somali region.

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Table 6.6 Regional imbalance in Ethiopia (own revenue resources in per cent of
total expenditure of the regional governments)