The World Bank’s Board of Executive Directors on Tuesday approved $1.2 billion ($600 million grant and $600 million credit) to Ethiopian government from the International Development Association (IDA).
The funding is provided in support of the Government of Ethiopia’s policies designed to accelerate economic growth and achieve its vision of becoming a lower-middle-income country.
The Government of Ethiopia has embarked upon a path of political and economic transformation. In addition to measures that build peace with Eritrea, the Government has recently broadened the political space to include opposition parties, actively engaged in regional diplomacy, and announced a range of economic reforms designed to revitalize the economy by expanding the role of the private sector.
This includes plans to gradually open up the economy and introduce competition to and liberalize sectors that have been dominated by key state-owned enterprises (SOEs).
In light of these sweeping reforms, the Government has requested technical and financial support for the international community to implement its new pathway to growth. The World Bank’s new operation responds to that request.
“The Growth and Competitiveness operation will directly support the Government’s program and planned reforms, with a focus on three pillars: maximizing finance for development, improving the investment climate and developing the financial sector; and promoting transparency and accountability,” said Nataliya Mylenko, World Bank Task Team Leader for the project.
The operation will promote public-private partnerships (PPPs) which will not only improve efficiency in key sectors (e.g. telecom, power and trade logistics), but also mobilize private financing which will enable Ethiopia to maximize the resources available for development financing.
In these key sectors, the support given will help to institutionalize restructuring, introduce high quality services, reduce inefficiencies and operating costs and improve financial performance. Ultimately these will help Ethiopia to attract foreign direct investment and raise export revenues.
Doing Business 2018 ranks Ethiopia 161th out of 190th countries globally and 31st in Africa. To improve the investment climate and develop the financial sector, the operation will help the Government to streamline business regulations that are favorable to private sector development, facilitate access to credit and establish government bond and foreign exchange markets.
The operation will help the government to modernize the financial sector and make the banking system more efficient in its operation. Ultimately this should mean more credit available for the private sector.
Additionally, the operation strives to enhance transparency and accountability by promoting citizen engagement social accountability; and improving the management of state owned enterprises which play a key role in the Ethiopian economy and are critical to the delivery of key public goods and services.
“The Government is taking bold steps to strengthen Ethiopia’s growth path and this operation will support the Government of Ethiopia’s efforts to improve competitiveness, boost exports, generate jobs and accelerate inclusive growth,” said Carolyn Turk, Country Director for Ethiopia Sudan and South Sudan.
The operation is aligned with the World Bank Group’s twin goals of ending extreme poverty and promoting shared prosperity, the Country Partnership Framework for Ethiopia, as well as the Government of Ethiopia’s development strategy.
The World Bank’s International Development Association (IDA), established in 1960, helps the world’s poorest countries by providing grants and low to zero-interest loans for projects and programs that boost economic growth, reduce poverty, and improve poor people’s lives.
IDA is one of the largest sources of assistance for the world’s 75 poorest countries, 39 of which are in Africa. Resources from IDA bring positive change to the 1.5 billion people who live in IDA countries.
Since 1960, IDA has supported development work in 113 countries. Annual commitments have averaged about $18 billion over the last three years, with about 54 percent going to Africa.