This Public Expenditure Review (PER), isthe seventh in a series of annual PERs for Ethiopia,addressing issues of public expenditure management, relevantto the government, and donors. As such, and as a result of ashared understanding between the Government, and a coredonor group, the report shifts the emphasis from analysis,to problem solving, and, from perspective of the federalgovernment, to the joint perspective of the federal, andregional governments. The progressive fiscal toll resultingfrom the border conflict, is examined within an economiccontext, for although the government did contain the fiscalimpact of the conflict by financing defense expendituresthrough budget contingencies, and other budgetary funds, itappears fiscal limits have been reached, as the significantrecourse to domestic financing, and reduced capitalspending, jeopardize the expansion of basic social services.Fiscal performance is reviewed, fiscal outcomes areprojected, and risks and alternatives analyzed, within thecontext of an information systems for strategic expendituremanagement, through performance indicators for budgetplanning, and financial reporting. However, the reportidentifies the need to provide technical assistance fordeveloping output, and outcome indicators, for buildingdatabases, and for capacity building, which would clarifyacceptance by the government, of PER recommendations, andits implementation. It is suggested that a Joint ReviewMission, based on the Annual Review Meeting, be adapted forthe PER process, to include an institutional involvement ofthe regions, in identifying, analyzing, and implementing recommendations.
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