Ethiopia Introduces New Tax to Compensation USAID Funding Pause

Ethiopia's parliament has introduced a tax targeting workers and businesses to address the funding gap caused by the USAID funding pause. The funds will support projects affected by the halt, particularly in regions impacted by conflicts. This tax applies across various sectors, and deliberations on contributions are underway.

Ethiopia's parliament took decisive action on Thursday by implementing a new tax targeting all workers in a bid to offset the financial shortfall left by the USAID funding suspension. This move comes as Ethiopia grapples with recurring conflicts in Tigray, Amhara, and Oromia, which have left millions in need of aid.

Funds raised through this tax will be allocated to the newly established Ethiopian Disaster Risk Response Fund. The fund aims to support projects previously financed by USAID, Ethiopia's largest development and humanitarian partner. Sectors expected to contribute include both private and public, with mandatory company contributions in banking and hospitality.

Ethiopia, previously the biggest beneficiary of US aid in sub-Saharan Africa with USD 1.8 billion received in 2023, has seen critical programs halted. These included food aid, healthcare, and other essential services. As the bill awaits committee deliberation, USAID staff in Ethiopia face administrative leave amidst uncertain futures.

(With inputs from agencies.)