Ethiopia is preparing to introduce a major shift in its fuel pricing regime, with a combined 30% tax on petroleum products set to take effect next month. The measure reflects the government’s wider move away from decades-long fuel subsidies as it pursues fiscal consolidation, tackles budget pressures, and advances the Homegrown Economic Reform Agenda.
The Ethiopian Petroleum Supply Enterprise (EPSE) will begin collecting the new charges—15% VAT + 15% excise tax—as part of a phased transition toward market-based pricing for petrol and diesel. The Ministry of Finance (MoF) has instructed EPSE to remit all federal fuel-related taxes directly to the Ministry of Revenues, signaling the centralization and tightening of fuel-related fiscal flows.
Reforming One of Ethiopia’s Costliest Subsidies
Fuel subsidies have long been among the government’s largest fiscal burdens. Since mid-2022, authorities have been dismantling them gradually, a process that has already resulted in higher pump prices across the country.
The new tax regime brings Ethiopia a step closer to the government’s stated goal: achieving full cost recovery for petrol and diesel by December 2025, including all statutory taxes.
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