Despite growing demand, Addis Ababa and other Ethiopian cities lack the capacity and readiness to start issuing municipal bonds as a way to raise financing to fill their growing budget deficits, says a report from UNDP, FSD, and Genesis Analytics.<\/p>\n
The report\u2019s authors assessed the potential of cities and regional states to issue bonds on the capital market, and raise finance to fill their growing budget deficits. They concluded that despite growing interest, they lack the readiness to efficiently utilize the financial tool.<\/p>\n
The study reviewed the constitutions of the Somali, Oromia, Afar, and Amhara regional states, which, besides reserving the power to enact laws that would help in generating revenue and mandate to formulate policies to grow the economy of the region, hold no specific clauses that clearly stipulate a regional state\u2019s authority to issue municipal bonds.<\/p>\n
However, regional financial administration proclamations for Amhara, Oromia, Harari, Tigray, and Addis Ababa grant borrowing powers to regional finance bureaus, including the authority to issue securities, subject to approval from regional councils, according to the study.<\/p>\n
It cites an article of the Amhara National Regional State Revised Finance Administration Proclamation, which explicitly states that the regional finance bureau is authorized to \u201cborrow money or issue a guarantee or securities on behalf of the Regional Government,\u201d confirming that borrowing powers\u2014including through the issuance of securities\u2014-are vested in the regional finance bureau.<\/p>\n
The report notes that Addis Ababa\u2019s overarching goal is to leverage private sector participation through municipal bonds to finance expansive infrastructure projects such as roads, water systems, housing, and health and education facilities.<\/p>\n
However, its authors say that while the city demonstrates a high level of knowledge and understanding of municipal bonds, its awareness of the detailed processes involved in issuing and managing these financial instruments remains limited.<\/p>\n
\u201cThis distinction reflects the difference between conceptual knowledge, such as knowing what municipal bonds are and what they can be used for, and procedural knowledge which includes the technical steps and institutional know-how needed to issue and manage them effectively,\u201d reads the report.<\/p>\n
It states that Addis Ababa\u2019s internal capacity to manage municipal bonds (from issuance to reporting) remains minimal to low, indicating that while the city is conceptually ready, it lacks the practical infrastructure and organisational strength to move forward effectively.<\/p>\n
The report cites gaps in legal and regulatory frameworks, limited organizational capacity, and concerns about revenue reliability for repaying bond obligations.<\/p>\n
It identifies Addis Ababa and Oromia as the strongest candidates for bond issuance based on their large and growing own revenues, significant capital investment budgets, and balanced budgets.<\/p>\n
\u201cOther regions face more constrained fiscal positions, with challenges such as low revenues, high dependence on federal transfers, and limited capital investment. Targeted, phased engagement with leading regions may offer an intelligent path forward,\u201d reads the report, which proposes starting with plain bonds offering fixed returns and predictable repayment in Addis Ababa and Oromia.<\/p>\n
The report highlights articles in the constitution that provide borrowing powers to regional and city administrations subject to conditions set by the federal government.<\/p>\n
\u201cThis is further reinforced by regional financial administration proclamations in several regions, which explicitly state that issuing securities is a permissible form of borrowing. City administrations are similarly empowered through their governing charters: the Addis Ababa and Dire Dawa City Administration Charters explicitly allow the issuance of bonds, subject to federal government authorization,\u201d it reads.<\/p>\n
Institutional awareness of municipal bonds remains limited, but interest is growing among regional authorities, according to the report.<\/p>\n","protected":false},"excerpt":{"rendered":"
Despite growing demand, Addis Ababa and other Ethiopian cities lack the capacity and readiness to start issuing municipal bonds as a way to raise financing to fill their growing budget deficits, says a report from UNDP, FSD, and Genesis Analytics. The report\u2019s authors assessed the potential of cities and regional states to issue bonds on […]<\/p>\n","protected":false},"author":42,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"editor_plus_copied_stylings":"{}","ngg_post_thumbnail":0,"footnotes":""},"categories":[1960],"tags":[],"class_list":{"0":"post-48008","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-latest-news-in-ethiopia"},"acf":[],"_links":{"self":[{"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/posts\/48008","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/users\/42"}],"replies":[{"embeddable":true,"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/comments?post=48008"}],"version-history":[{"count":0,"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/posts\/48008\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/media?parent=48008"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/categories?post=48008"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/tags?post=48008"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}