Ethiopia - Military Spending

Ethiopia is 116th in the world in terms of military spending. The 1.2 percent military spending by Ethiopia is very low compared with its neighboring and regional countries including Eritrea (6.3 percent and 8th), Djibouti (3.8 percent and 27th), Egypt (3.4 percent and 33th), Sudan (3.0 percent and 41th) as well as Kenya (2.8 percent and 47th).

On the one hand, Ethiopia is committed to placing all its resources at the disposal of economic development. On the other hand, te country had to build a strong defense. This will reduce expenditure for development. Ethiopia needs to do both. Clearly the challenge in the building of a strong defense is that of the availability of resources. Th national defense force should essentially be within the limits of economic capacity, and should not be above or below the needs defined by threat analysis.

Accordingto Ethiopia’s Policy and Strategy On Foreign Affairs and National Security issued November 2002 "Most economists agree that when a country allocates more than 2% of its G.N.P. to defense, the effects on growth are significant. This is not to say that a less than 2% expenditure does not put any pressure on the economy. We can, and of course, we must strive to limit our defense budget to no more than 2% of our gross national product. If, however, our economic development increases, the defense budget will automatically rise proportionally. Our economic growth will therefore mean that the money going to defense will rise as well, enabling us to build a reliable defense force without undue negative impact on the economy."

In the last years of the military regime, defense spending peaked at almost US$1 billion dollars, or nearly 14 percent of gross domestic product (GDP). In the mid-1990s, spending shrank significantly to about US$130 million (or 2 percent of GDP). The onset of war with Eritrea in 1998, however, spurred massive spending to cover capital investments in new weapons systems, and by 2000 defense expenditures exceeded US$830 million (or nearly 11 percent of GDP). Military spending during the war is thought to have averaged at least US$2 million per day.

Since the December 2000 peace agreement, spending on defense has fallen by 50 percent, but is still quite high, particularly for such a poor nation. In 2003 a national security policy paper proposed reducing defense spending to 2 percent of GDP (roughly a quarter of the 7.7 percent of GDP, some US$460 million, spent in 2002), but in light of continuing tensions with Eritrea, implementation of this policy has been delayed indefinitely. Ethiopia reportedly is using hard currency from remittances to finance current arms purchases. In 2003 the defense budget was US$405 million.

During World War II, when major military expansion programs began, the government devoted approximately 38 percent of the national budget to defense. From 1948 to 1958, the proportion of the budget dedicated to defense dropped from 27 to 17 percent of the total, not because of a decrease in military expenditures but because the size of the overall national budget had increased sharply. Throughout the 1960s and early 1970s, money for defense remained the largest single item in the budget, varying from 19 to 24 percent of the total funds appropriated for all national programs.

Military expenditures during EFY 68 (July 75 - June 76) were us $145 million compared to us $96 million for EFY 67 (July 74 - June 75), and increase of 50 percent. Us $80 million were for in-country costs while us 65 million were for offshore procurement. Defense expenditures for EFY 68 were roughly 22 percent of total expenditures and 5 percent of GNP (current prices). For EFY 69 (July 76 - June 77) the government carried US$104 million in its published budget, which is clearly too low. Embassy expects expenditures to be roughly us $175 - 185 million or approximately 25 percent of total expenditure and 5.5 percent of GNP.

The totals for ground forces, air force and navy as well as total defense expenditures include all expenditures in each category. These figures for EFY 67 exclude grant military assistance but presumably include FMS cash and credit outlays. The government spent an additional 70 million Birr in regularly budgeted funds plus 55 million Bbirr in un-budgeted returns from a Ministry of Finance gold sale from its unrecorded gold stocks (Sept/Oct 1975), presumably to finance offshore procurement.

Beginning in the mid-1970s, defense expenditures started to rise. In 1974 Addis Ababa allocated the equivalent of US$80 million for defense, in 1976 US$103 million, and in 1979, US$526 million. By 1987-88 defense expenditures had declined to approximately US$472 million; however, it should be pointed out that between 1977 and 1990, the Soviet Union had provided approximately US$13 billion in military assistance to the Mengistu regime.