Proclamation No. 1250/2021: A System for the Determination of the Division of Federal Subsidies and Joint Revenues

On July 2, 2021, the Federal Democratic Republic of Ethiopia enacted Proclamation No. 1250/2021 to establish a comprehensive, fair, and transparent system for the division of federal subsidies and joint revenues.

Key Provisions:
Establishes types of federal subsidies:

✔️General-purpose subsidy – intended to equalize fiscal capacities across regions
✔️Specific-purpose subsidy – allocated conditionally to support national priorities such as institutional capacity, infrastructure, and climate resilience

Identifies criteria for subsidy distribution:

✔️ Regional expenditure needs
✔️ Potential revenue-raising capacity

Introduces a five-year review cycle for the subsidy distribution formula, with provisions for interim data updates

Joint Revenues:

The proclamation outlines procedures and principles for the sharing of joint revenues, focusing on:

Equity, including per capita considerations

Derivation, especially in natural resource-related revenues

Compensation for environmental and infrastructural harm

Recognition of spillover effects and local development impacts

Institutional Framework:

The House of Federation Secretariat is assigned responsibility to:

Prepare and recommend distribution formulas

Monitor implementation

Conduct consultations and ensure up-to-date, credible data use

Report to the House of Federation via the Grant Budget and Shared Revenue Affairs Standing Committee

The House of Federation retains full authority to supervise implementation, resolve disputes, and issue directives and regulations under this framework.

Proclamation No. 1250/2021 is now the governing legal framework for Ethiopia’s equitable and rules-based intergovernmental fiscal transfers.

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