Parliament has voted to establish the Ethiopian Disaster Risk Response Fund, in a landmark move designed to reduce the country’s growing reliance on foreign aid in the face of recurring natural and man-made disasters.
The legislation, passed on Thursday, authorizes the creation of a domestically funded disaster response mechanism. The bill was originally drafted by the Disaster Risk Management Commission and has been under review for more than two years.
Significantly, lawmakers ratified the bill without the controversial clause that would have allowed the government to impose new income taxes to support the fund. The removal of this clause is expected to reduce public resistance to the fund while encouraging compliance from the sectors now mandated to contribute.
Who Will Pay Into the Fund?
According to the final version of the bill, the fund will be financed through mandatory contributions from the financial services industry, telecommunications firms, the aviation sector, and public enterprises.
Curiously, donor agencies are also listed as contributors—raising eyebrows among critics, who question how a fund meant to reduce aid dependence will still expect financial support from foreign donors.
Despite this contradiction, officials argue that the Fund will enable a more sustainable approach to disaster risk reduction, emergency response, and post-disaster recovery, by mobilizing local financial resources and strengthening institutional preparedness.
Context: Rising Disasters, Shrinking Aid
The ratification comes at a critical time for Ethiopia. The country continues to grapple with droughts, floods, earthquakes, armed conflict, and widespread displacement, which have left tens of millions of people vulnerable.
According to the United Nations, Ethiopia will require at least USD 2 billion to meet humanitarian needs in 2025—a figure that becomes harder to meet as international donor support dwindles.
Observers warn that Ethiopia’s dependency on foreign aid is increasingly unsustainable. The new fund is thus seen as a proactive step, though its real-world effectiveness remains to be seen.
Impact of US Aid Cuts and Trump’s Foreign Policy Shift
The fund’s creation follows sweeping aid cuts by the United States, triggered by policy changes under President Donald Trump’s second term. The US has drastically reduced funding to USAID and related agencies, directly affecting Ethiopia.
Key humanitarian projects—including education, health services, refugee support, and civil society capacity building—have been suspended or canceled. A source at a leading NGO told The Reporter that as many as 85% of civil society organizations in Ethiopia have shut down or suspended activities since the US policy shift.
WFP and Other Agencies Feeling the Squeeze
The World Food Programme (WFP) also reported severe funding shortfalls earlier this year. In April 2025, the agency announced it had suspended nutrition treatment for over 650,000 malnourished women and children in Ethiopia due to lack of funds.
UN officials warn that if current trends continue, more people may face hunger, disease outbreaks, and further displacement.
Next Steps and Expectations
Supporters of the new Disaster Risk Response Fund say it will provide greater autonomy and resilience in crisis situations. However, others caution that clear governance, transparency, and coordination will be crucial to ensure the fund doesn’t fall prey to bureaucracy or mismanagement.
Experts are calling for the establishment of an independent oversight body and regular audits to build public trust. There are also recommendations for public-private partnerships to broaden the fund’s base and maximize its reach.
