Gambling With Growth

Welcome to this week’s edition of ፍራንክ Digest!

Your weekly brief on all things Finance and Investing. Quick, enjoyable reads for busy professionals in 5 minutes or less.

Topics this week:

• 🎰 The Lottery Paradox: Lucky Break Or Budget Burden?

• 🍫 Crunch Time: How Government Owned Enterprises Are Hindering Borrowers

Thanks for reading!

Lottery and Betting: Ticket to Easy Money?

Budget

Lottery has long been a source of fascination for governments, who see them as a means to patch budget deficits and in best case scenarios to fatten the coffers without too much effort.

While some may view these activities as little more than a "painless gamified tax" on the public, the reality is more nuanced.

Where does lottery revenue go?

The National Lottery of Ethiopia was founded in 1961 to sell lottery tickets and assist budgetary funding needs for infrastructure, healthcare and education programs.

Most lotteries in Ethiopia have a fixed payout prize with tiered winners (1st, 2nd, and so on) despite the ticket sales revenue. This means in rare cases the National Lottery could just break-even but most times it makes lots of profit.

On the other hand, bingo lottery has a growing prize depending on ticket sales revenue and in Ethiopia 50% of the revenue goes to the prize pool. Whereas, estimates from the lotteries association in the US indicate:

• 65% of revenue from ticket sales goes into the prize pool

• 24% is used for state budget

• 5% is used to cover lottery operating costs

• 6% is paid to retailers as commission

According to a research paper by Cepheus Capital, in 2022/23 budget year national lottery surplus contributed ETB 20.8 bln towards the Ethiopian government’s total annual revenue of ETB 479.5 bln (4.33%).