The federal government has raised retail fuel prices in a move shaped by domestic economic pressures and turbulence in global oil markets.

Effective May 8, 2025, the Ministry of Trade and Regional Integration announced that gasoline prices would rise by 10 birr to 122 birr per litre, while diesel and kerosene prices increased from 106 birr to 116 birr per litre.

The adjustment reflects the government’s ongoing efforts to phase out costly fuel subsidies amid volatile international oil prices and a weakening Ethiopian birr.

The price hike is a key component of Ethiopia’s broader economic reform agenda, which seeks to reduce fiscal deficits and align domestic fuel prices with global market levels.

Fuel subsidies have long strained public finances, with Prime Minister Abiy Ahmed noting that they cost the government approximately 72 billion birr annually an unsustainable burden given Ethiopia’s economic challenges, including high inflation and foreign exchange shortages.

The gradual elimination of these subsidies is part of a strategy that also includes the privatization of state-owned enterprises and the liberalization of key sectors measures aimed at fostering long-term stability and attracting foreign investment.

The decision comes against a backdrop of heightened volatility in international oil markets. Brent crude, the global benchmark, is currently trading at approximately 62.87 US dollars per barrel as of 8 May 2025 a figure prone to fluctuation due to geopolitical tensions, supply chain disruptions, and shifting demand patterns.

Even with the recent increase, Ethiopia’s fuel prices remain below the global average of 1.26 US dollars per litre (approximately 164 birr), underscoring the extent to which subsidies have historically shielded consumers from international price swings.

The depreciation of the birr has further compounded the challenge. Weakened by persistent trade deficits and inflationary pressures, the currency’s decline against the dollar has inflated the cost of oil imports, eroding the government’s ability to maintain subsidised prices without jeopardising fiscal health.