This study analyzes the process of moving towards program budgeting in Ethiopianrnpublic agencies and its implication on the budgeting system. 'The study focuses Onrnidentifying reform needed for program system in Ethiopia system in Ethiopian public agenciesrnot federal ministries level, analyzing the attitude of employees towards newrnbudge ting system at the federal offices of the minis try. It also focuses on analyzingrnthe challenges and implication of program budgeting system in public agencies atrnfederal office of the ministries.rnrnThe study employed the mixed approach that is qualitative and quantitative researchrndesign to describe the respondent's responses and to answer the research questions.rnSpecifically, the data was collected through semi-structured questionnaire whichrncontain s both open-ended and closed questions. The study descriptively analyzes therndata elicited from surveys and documents. The data was presented in the form ofrntable and analyzed using frequency and percentage. Then the data interpreted basedrnon t he analysis. Lastly, the findings derived from the interpretations.rnrnThe result of this combine d research methodology reveal that there is no need ofrnnew organizational design for program budgeting. However, the study identified thatrnreform in financial management, linking program structure with the objectives ofrnor generational structure, and ne w technologies are needed for the implementationrnof program budgeting. The study also reveals that there is a confusion andrnchallenges in implementing program budgeting. The study also identifies manger'srnresponsibilities in the system and implication of program budge ting on the publicrnexpenditure .rnrnThe study suggests the effective way which could be taken by the concerned bodyrnand Ministry of Finance and Economic Development in particular, to make therntransition to program budgeting and implementation of program budgeting g. Finally,