The government will loosen its commitment to a tight fiscal stance despite the risk of macroeconomic imbalances after several years of rapid growth. Spending will rise quickly, as an impatient government will continue to espouse a state-led development model that places the emphasis on public investment rather than private-sector growth. Domestic revenue performance will improve at a decent rate, although it is coming from a low base relative to GDP, even by African standards. The revenue agency, the Ethiopian Revenues and Customs Authority, will continue to implement measures to broaden the tax base, improve compliance and reduce evasion. A windfall tax on bank profits arising from the 16.7% devaluation of the currency in September 2010 will bolster government coffers in fiscal year 2010/11 (ending July 7th). Overall, we expect the budget deficit as a percentage of GDP to edge slightly higher, to 2.5% in 2010/11 and to 2.3% in 2011/12, as a public-sector pay rise of over 30% will ensure that the government balance cannot match its performance in 2009/10. The deficit could be exacerbated depending on the scale of government involvement in importing commodities and if they are sold at a loss in an effort to maintain the price ceilings that the government introduced in January. The deficit will be financed through a combination of external debt and cheaper domestic debt as high inflation causes negative real interest rates on Treasury bills.