3 November 2018

Ethiopia: All Smiles, Lifelines

On Friday, November 2, 2018, the World Bank's International Development Association approved grants and loans to Ethiopia. Carolyn Turk , country director for Ethiopia, Sudan and South Sudan at the World Bank, and Ahemed Shide (centre), the recently appointed Finance minister, signed the 1.35-billion-dollar agreement. Also present at the signing ceremony were Hirut Woldemariam (PhD) (left-centre), minister of Science & Higher Education, Abdiwasa Abdilahi (PhD) (right-centre), state minister of Science & Higher Education, and Eyob Tekalgne, state minister of Finance.

The agreement will be used to support two World Bank projects - Growth & Competitiveness and the East Africa Skills for Transformation & Regional Integration Project. Loans and grants totaling 1.2 billion dollars were allocated to support economic reforms and gradual liberalisation. The second fund commitment of 293 million dollars is to support access and quality initiatives for technical training in Kenya, Tanzania and Ethiopia. Almost half of this second funding is allocated to Ethiopia.

These loan and financing agreements come on the heels of one billion dollars in direct budgetary support promised to Ethiopia by the World Bank. The budgetary assistance arrives at a crucial time for Ethiopia with its recent disappointing macroeconomic performance. The lacklustre achievement is mostly attributed to political instability and a lack of foreign currency by the government. However, international financial institutions attribute the poor performance to expansionary fiscal policies and an inflexible exchange rate regime.

Prime Minister Abiy Ahmed's (PhD) administration has taken steps to reform the economy by tightening the belt on government expenditures, making the foreign exchange regime relatively more flexible and deciding to privatise major state enterprises.


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