Ethiopia Finalises Talks for $600 Mln Crisis Fund as Fuel Subsidy Costs Pass 300 Bln Birr

Mintesinot Niggusie

Ethiopia has finalised negotiations for a 600 million US dollar Crisis Response facility aimed at easing pressure from surging global fuel prices and instability in the Middle East, the Ministry of Finance said.

According to Capital Newspaper, the financing package forms part of a wider 1.6 billion US dollar programme known as DPO3, backed by the World Bank and the Italian government. Officials said the support is intended to help the government sustain fuel imports, stabilise domestic markets and contain inflationary pressures linked to rising oil prices.

Finance Minister Ahmed Shide disclosed the development on May 4, 2026 while presenting the ministry’s nine-month performance report to the Standing Committee on Planning, Budget and Finance.

According to the ministry, Ethiopia secured 2 billion US dollars in external disbursements during the first nine months of the fiscal year, with the World Bank accounting for more than 73 percent of the total. The government aims to mobilise 4.1 billion US dollars by the end of the fiscal year.

Officials said support from development partners is increasingly shifting from project-based financing towards direct budget support and balance of payments assistance, allowing the government to implement fuel sector reforms gradually. The government had initially planned to phase out broad fuel subsidies before launching its macroeconomic reform programme.

Authorities warned that passing the full impact of global oil price increases and exchange rate movements onto consumers could trigger severe inflation and intensify pressure on households and businesses. The ministry said cumulative fuel subsidy costs have now exceeded 300 billion birr.

“Despite facing substantial financial pressure, the government has maintained the subsidy with a strong sense of responsibility, rather than passing the entire price increase onto the public,” Ahmed told lawmakers. The minister said the government continues to allocate around 100 billion birr annually for fuel subsidies to shield low-income communities and avoid disruptions to industrial activity.

Officials also linked the additional financing needs to ongoing geopolitical conflicts affecting energy markets and supply chains. The Crisis Response facility was negotiated following discussions with international financial institutions in the United States and forms part of a broader cooperation framework involving the World Bank and the IMF.