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Ethiopia's Government Raises Civil Servants' Salaries Amid Cost of Living Crisis

Strategic Insights

— 1 min read

As the government of Ethiopia attempts to ease the rising cost of living, it has announced a significant salary increase for civil servants, with the lowest-paid employees set to receive a 26% hike. The move marks a commendable response to the economic hardships facing employees, according to Kassahun Follo, President of the Confederation of Ethiopian Trade Unions (CETU). However, with the government warning that it will take action against traders who unjustifiably raise prices, concerns remain about the impact of the pay raise on the overall economy.

Key Takeaways:

  • The government's decision to revise civil service salaries will add 160 billion birr to state payrolls, raising annual salary expenditure to 560 billion birr.
  • The minimum salary for civil servants will rise from 4,760 birr to 6,000 birr (EoeUS$44-$49.34) per month, while the maximum salary will nearly double from 21,492 birr to 39,000 birr (EoeUS$158-$286).
  • The entry-level salary for bachelor's degree holders will increase from 6,940 birr to 11,500 birr (EoeUS$49.34-$82) per month.
  • The government has announced that it will take action against traders who unjustifiably raise prices, warning that 'money-obsessed traders' have previously rushed to exploit such measures by inflating prices.
  • Labor unions have pressed for stronger measures, including a national minimum wage and further income tax exemptions.
  • The Ministry of Trade and Regional Integration (MoTRI) has announced that it will work in coordination with justice and security bodies to take corrective measures against non-compliant traders.
  • The latest revision coincides with the 2025 income tax reform, which raised the tax-free threshold from 600 birr to 2,000 birr (EoeUS$4.6-$14.7) per month.

Statistics:

  • 26%: The percentage increase in the minimum salary for civil servants.
  • 160 billion birr: The amount added to state payrolls due to the salary increase.
  • 560 billion birr: The new annual salary expenditure for civil servants.
  • 20%: The current inflation rate in Ethiopia.
  • 2.5%: The projected budget deficit of Ethiopia's GDP.

Sources:

  • Kassahun Gofe, Minister of Trade and Regional Integration, as quoted in the Ministry's statement on August 18.
  • Kassahun Follo, President of the Confederation of Ethiopian Trade Unions, as quoted in state media on August 18.
  • Federal Civil Service Commission, announcement on August 18.
  • Ministry of Trade and Regional Integration, statement on August 18.
  • Parliament of Ethiopia, revised income tax proclamation passed earlier this year.

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