compared to 3.7 percent in 2006/07.This was projected to decline significantly to 1.3 percent of GDP in 2009/10. With grants amounting to between 4 and 5 percent of GDP, donor support continues to be critical in keeping the budget deficit manageable. Improvements in the fiscal position have entailed an increase in domestic revenue mobilisation as well as a fall in public expenditure. Tax revenue as a share of GDP increased in 2007/08 fiscal year, but was offset by a fall in grants. 300 There has also been a considerable shift in domestic revenue composition. The proportion of taxes in total revenue increased from 76 percent in 2001/02 to 80 percent in 2007/08. Within tax revenues, direct taxes declined from nearly 40 percent of total tax revenues in 2001/02 to about 30 percent in 2007/08; indirect taxes rose from 61 percent to 71 percent over the same period. Import duties accounted for 70 percent of indirect taxes and nearly 40 percent of domestic revenue in 2007/08. Poverty 301 Riding on the tide of this strong growth performance, Ethiopia has made significant strides in improving the living standards of its citizens over the past decade. Household survey evidence suggests that between 1999/00 and 2004/05, real total expenditure per capita grew by 19 percent (15 percent with respect to 1995/96). As discussed in Chapter Six, this has resulted in significant reductions in poverty in recent years. The poverty headcount fell by 12.4 percentage points between 1999/00 and 2004/05 and by 18.5 percentage points from the mid1990s onwards. 302 Despite this progress, as noted in Chapter Two and as discussed in Chapter Six, Ethiopia is, one of the poorest countries in the world. Monetary poverty remains a significant challenge, particularly considering that around 25 million people continue to live below the poverty line, and about 77.8 percent of the population lives on US$ 2 a day, or less. Inequality, as measured by the Gini coefficient, increased from 0.28 in 1990/00 to 0.32 in 2004/05, which implies that growth has not been broad-based. Macro-economic stability challenges 303 Despite the above gains, Ethiopia faced a turbulent external environment during 2008–09, with commodity price surges, and later, as discussed below, the global recession, producing a series of shocks to the balance of payments. Facing declining reserves and high inflation, from late-2008, the authorities implemented an effective macroeconomic adjustment package supported by the Fund, under the rapid-access component (RAC) of the Exogenous Shocks Facility (ESF). - 131 -