Ethiopia Introduces New Tax to Address USAID Funding Gap

Ethiopia’s parliament has enacted a new tax on workers to address funding gaps from a USAID pause. The revenue will support the Ethiopian Disaster Risk Response Fund for vital programs formerly subsidized by USAID. Ongoing conflicts have led to millions needing assistance, prompting Ethiopia to seek internal funding solutions.

Ethiopia’s parliament has approved a new tax initiative targeting all workers to address the financial void created by the recent pause in USAID funding. The revenue generated will be allocated to the newly established Ethiopian Disaster Risk Response Fund, aimed at supporting projects previously funded by USAID, which has been a key contributor to Ethiopia’s humanitarian efforts.

Amid ongoing conflicts in regions such as Tigray, Amhara, and Oromia, millions in Ethiopia require food assistance and healthcare. The tax will affect employees in both the public and private sectors, and a mandatory contribution will be collected from businesses across various sectors, including banking and hospitality. The proposed tax bill is currently under review by a parliamentary committee that will determine contribution percentages.

As the largest recipient of U.S. aid in sub-Saharan Africa, Ethiopia received $1.8 billion in the 2023 financial year, funding essential programs like food security, HIV treatments, vaccines, literacy initiatives, job creation, and support for around one million refugees. However, many of these program operations have ceased, and USAID staff overseeing these initiatives have been placed on administrative leave, pending potential termination.

In summary, Ethiopia’s introduction of a new tax reflects a strategic approach to mitigate the financial impacts of the USAID funding pause. The initiative aims to maintain essential services and support amid ongoing regional challenges. The government is actively seeking alternative funding sources to assist millions affected by recent conflicts and disruptions in aid.

Original Source: www.newsday.com