Overseas Development Institute study examining climate related finance and delivery in Ethiopia.
Climate change is already impacting Ethiopia, both in terms of frequency and intensity of droughts, and increases in flooding. This has stressed social institutions and intensified the vulnerability of households. Furthermore, low levels of economic activity, increasing population size, and a high dependence on rain-fed agriculture makes Ethiopia particularly vulnerable to adverse effects of climate change. In this context, this Overseas Development Institute study sets out to identify climate change-relevant public expenditures within the Ethiopian federal budget, and to assess whether this funding is being effectively delivered. The study measures the effectiveness of this delivery through a governance and institutional lens, examining policy processes and the institutions responsible for decisions over budget allocations over a four year period. Four key principles are used as a framework for the assessment of policy: ease of implementation, legitimacy, coherence, and transparency. For institutional performance, coordination, innovation, and local anchorage are the criteria used, while the principles relating to budget delivery are planning, execution, reporting, and external audits.
The key message from the study is that there are major challenges ahead for Ethiopia to finance its response to climate change. The national Climate Resilient Green Economy strategy has called for annual spending of $7.5 billion to respond to climate change. Yet with national budgetary resources for climate change-related activities estimated to be around $440 million per year, and international sources adding just several tens of million USD per year, there seems to be a major financing gap. If the strategy is to be delivered, much more needs to be done to mobilise additional resources, both domestically and internationally. The study highlights that there is much still to uncover about climate finance delivery at national and sub-national levels, requiring further empirical research. A gap in the data for ‘off-budget’ financing delivered by traditional development partners and other international expenditures also calls for further study to determine the true level of current commitments, actual disbursements, and likely trends for future funding.