The move to increase military spending came a week after Ethiopia appealed for international help as it faces its worst famine since more than a million people starved to death in 1984 and 1985.
Amid drought conditions and soaring global food prices, the UN estimates four million people are now at risk of starvation.
The US Agency for International Development (USAID) plans to send about 95,000 tonnes of food to the Horn of Africa nation next month.
Ethiopia will also receive an additional $10m in medical supplies, water services and other non-food aid, USAID said in a statement.
Ethiopia is involved in a border row with Eritrea that has remained unresolved despite the signing of a peace deal that ended their two-year war in 2000.
Ahmed, the finance minister, said the extra $50m for the military was needed to ensure stability "as we are based in the Horn of Africa region".
|Ethiopia is involved in a border row with Eritrea |
and a battle against fighters in Somalia [AFP]
Troops from Djibouti and Eritrea clashed along the border on Tuesday after Eritrean soldiers reportedly carried out an incursion in the Ras Doumeira area on April 16.
The claims sparked a tense standoff which raised fears of an all-out military confrontation at the southern end of the Red Sea, one of the world's busiest shipping lanes.
Ethiopian troops have also been battling fighters loyal to the Islamic Courts Union in Somalia after entering in late 2006 to bolster Somalia's beleaguered transitional government, a move supported by the US.