With fuel subsidies climbing and an international bond row heating up, Ethiopia is bracing for a bigger budget bill next year, and the Iran war is front and centre.

Ethiopia is set to ramp up its government spending next fiscal year, and according to cbinews.tv, the main reason is fallout from the Iran war.

Finance Minister Ahmed Shide told parliament on Thursday that total spending for the 2026/27 fiscal year, which kicks off next month, is projected at roughly 2.34 trillion birr, about $14.69 billion. That is a jump from 1.92 trillion birr this year.

Shide did not go into detail on exactly how the Iran conflict is driving costs, but cbinews.tv notes the government has already hiked fuel subsidies since the war began.

Despite the spending increase, the deficit picture is actually improving. The government expects a budget deficit of 1.4% of GDP next year, down from the 2.2% forecast it made a year ago for the current fiscal year.

On growth, Shide said Ethiopia is targeting 10.1% economic expansion next year, roughly in line with this year’s performance.

Export earnings are also on the radar. Over the first 10 months of this fiscal year, Ethiopia brought in $8.7 billion from exports, and Ahmed said the figure should hit $10.5 billion by year end.

Those numbers matter to markets, cbinews.tv reports, because they are at the heart of a dispute between bondholders and the government over whether Ethiopia is facing an insolvency problem or just a liquidity squeeze.

Talks to restructure Ethiopia’s $1 billion international bond ran into trouble again last month after bondholders turned down the government’s latest offer. Now, cbinews.tv says some bondholders are gearing up to take legal action.

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