Ethiopia’s parliament has introduced a bold tax initiative to bridge the budget shortfall caused by the abrupt suspension of USAID funding.
The revenue generated will support the newly established Ethiopian Disaster Risk Response Fund, which aims to finance projects previously backed by USAID, Ethiopia’s long-time partner in development and humanitarian aid.
Persistent conflict continues to plague regions such as Tigray still recovering from a devastating two-year war, alongside Amhara and Oromia. The unrest has left millions in urgent need of food and medical assistance.
The new levy will apply to employees across both the public and private sectors, while industries such as finance and tourism will face additional mandatory contributions. Parliament has referred the proposal to a committee to finalise the tax rates.
With a population exceeding 125 million, Ethiopia had long been the largest recipient of U.S. aid in sub-Saharan Africa, receiving $1.8 billion in the 2023 fiscal year.
These funds previously supported critical services, including emergency food relief, HIV treatment, child vaccinations, education programmes, and employment initiatives, while also sustaining over one million refugees within the country.
However, nearly all these operations have come to a standstill. USAID workers who ran them are now on leave, unable to carry out their duties, and teetering on the edge of layoffs.
