The African Development Bank (AfDB) Ethiopia Country Office has launched its Country Focus Report (CSP) for 2025

“Making Ethiopia’s Capital Work better for Ethiopia’s Development”

The African Development Bank (AfDB) Ethiopia Country Office has launched its Country Focus Report (CSP) for 2025, one of its flagship reports. Themed “Making Ethiopia’s Capital Work Better for Ethiopia’s Development,” the report was launched a day after the AfDB Group headquartered in Abidjan, Cote d’Ivoire, officially announced the subsequent launch of the CSP series for all African countries.

The launch ceremony for Ethiopia CSP took place on 24 June 2025 at Radisson Blu Hotel, Addis Ababa, in the presence of government officials, academia, development partners, and different stakeholders.

In his welcome remark, Leandre Bassole, Director General of the Central Africa Region of the African Development Bank, stated that to achieve structural transformation and Sustainable Development Goals (SDGs), Ethiopia requires 13.2% of its GDP in additional financing by 2030, and tax revenue is a key source of domestic revenue. Yet, the tax-GDP ratio is below the requirement and among peers, necessitating the government to enhance taxable capacity, improve compliance, and ameliorate tax relief measures. He emphasized that Ethiopia must pursue executing its revenue mobilization strategy, developing the financial and capital market, fostering public-private partnerships (PPPs), blending Overseas Development Assistance (ODA), and leveraging the FinTech ecosystem. Ethiopia must also strengthen the governance of natural capital to unlock untapped potential, including the artisanal mining sectors.

In his opening remark, representing the Minister of Finance of the Government of Ethiopia, Berhanu Anbesa, head of International Financial Institutions Cooperation Division, stated that the report comes at a time when the world is faced with several challenges, such as the ongoing international conflicts and political instability in several countries, deepening geopolitical fragmentation, declining concessional financing, and rising global uncertainty spurred by emerging trade policies in several countries. These shocks have had profound effects on our economies, increased the cost of living, and constrained the fiscal space in our countries, including Ethiopia. The theme of the report reflects Ethiopia’s agenda on the need for reforms and commitment to structural transformation. Given the tendency of decline in Official Development Assistance, Ethiopia has to look into seriously harnessing all its potential capital – fiscal, human, natural, business, and financial.

The launching was followed by presentations by experts from AfDB Ethiopia, followed by plenary discussions with representatives including Professor Tasew Woldehana, former president of AAU and currently president of Ethiopian Economics Association (EEA),  Tadele Ferede Associate Professor of Economics at AAU, Dr. Getnet Alemu, Associate Professor of Development Economics at AAU, Solomon Tesfasellasie, Advisor at Ethiopian Ministry of Finance, and other representatives from the bank, ministries, academia, embassies, and development partners. The discussants emphasized the need for narrowing the theme of the report, deep diving on the ‘how’ side of the recommendations and distilling relevant country experiences.

The report forecasted a 7% GDP growth for Ethiopia in 2025. Ethiopia’s economy grew 7.3% in 2023/24 compared to 6.6% in 2022/23, as the country is slowly emerging from multiple overlapping shocks over the past four years. The growth was led by agriculture (7%), service (7.7%), and manufacturing (8.3%). On the demand side, growth was driven by private consumption and investment.

The fiscal deficit narrowed to 2.0% of the Gross Domestic Product (GDP) in 2023/24 from 3.3%. The financial sector remains stable, with a non-performing loan ratio of 3.9%. Yet, inflation remained high at 26.6% in 2023/24 and is forecasted to drop to 15.9% in 2025. Ethiopia faces a high risk of debt distress. Per capita income reached US$1,937 in 2023/24, states the report.

Nonetheless, the report stressed Ethiopia requires 13.2% of its GDP in additional financing requirements by 2030 to realize its ambition of structural transformation. Tax revenue increased by only 22.0% in 2023/24 compared to 35.8% in 2022/23, and the tax-to-GDP ratio fell to 6.2% in 2023/24 from 6.8% in 2022/23. Current spending pressures have been addressed through cuts in capital expenditure, which have affected access to social services, the report revealed.

During the presentations, AfDB experts also urged expanding the tax base is crucial, but with caution of not deepening poverty implications.

The report recommended Ethiopia needs to devise different revenue mobilization tools to tap into its vast capital potential, specifically its potential in investment capital, human capital, and especially its natural capital. These tools include green bonds, carbon credit, leverage Fintechs, capital market, optimize human and natural capital, expanding the domestic resource mobilization base, and investing in strategic areas to diversify the growth frontiers.

Ethiopia has sizable natural and human capital17 and is Africa’s fourth wealthiest nation in renewable resources, which grew respectively by 101%, 579%, and 100% between 1995 and 2018. Nonetheless, it has not benefited from these resources due to inadequate institutions and infrastructure, low technology adoption, poor governance, and weak capacity. Ethiopia is Africa’s fourth wealthiest country in terms of renewable resources, with an estimated value of US$ 195.8 billion in 2018, next to DRC. Ethiopia is one of the twenty least wealthy African countries in non-renewable natural resources.

In nonrenewable natural resources, Ethiopia is among the twenty least wealthy African countries. Ethiopia’s total wealth increased by 432% from 1995-2018, against 118.1% of SSA, according to the report.

For additional information, contact: l.altaye@afdb.org OR a.endale@afdb.org

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Source: This article is authored by the African Development Bank (AfDB) Ethiopia Country Office.