Ethiopia: World Bank Backs Ethiopia's Reforms to Promote Sustainable and Inclusive Growth, Enhance Resilience, and Take Climate Action

30 July 2024
World Bank (Washington, DC)

Washington — The World Bank's Board of Executive Directors approved today the Ethiopia First Sustainable and Inclusive Growth Development Policy Operation. This policy operation supports home-grown reforms that will ultimately help the country transition to a more inclusive economy that allows the private sector to contribute more strongly to growth. While strengthening the financial sector, expanding trade options, and improving fiscal transparency, this engagement will also boost protections for poor and vulnerable households during periods of economic change. It consists of a $1 billion grant and $500 million concessional credit from the International Development Association (IDA)*.

Reforms supported by the operation help increase the private sector orientation of Ethiopia's economy by addressing the root causes of macroeconomic imbalances and expanding trading opportunities. The operation also supports a more sustainable and inclusive growth model through reforms to improve financial stability and financial sector competition, increase fiscal transparency, improve public spending effectiveness and the performance of state-owned enterprises, as well as expand social safety nets.

"Successful implementation of these reforms can help the country reach its full potential so more Ethiopians can thrive. Importantly, there is a strong emphasis on protecting poor and vulnerable people from the costs of economic adjustment and expanding opportunities for them to participate in the economy," said Maryam Salim, World Bank Country Director for Eritrea, Ethiopia, South Sudan, and Sudan.

The operation also helps promote sustainable land and forest management and expand access to renewable energy. This will support Ethiopia in achieving its climate change goals and building more resilience to climate risks. The operation is complemented by the World Bank's broader portfolio in Ethiopia which includes investments in health, education, social protection, energy, finance, digital, agriculture, transport and trade logistics, water and sanitation, and urban development.

The World Bank Group is one of Ethiopia's largest providers of development finance. Ethiopia currently receives over $2 billion in concessional financing each year from IDA with roughly half of this as grants. IDA commitments now stand at $15.5 billion, with almost $7 billion available to disburse. The International Finance Corporation's (IFC) investment portfolio is $320 million. The Multilateral Investment Guarantee Agency (MIGA) is actively engaged with $1.15 billion in guarantees.

Looking ahead, the World Bank is committed to supporting Ethiopia's aspiration of becoming a middle-income country. IDA expects to provide around $6 billion in new commitments over the next three fiscal years and support economic reforms through fast-disbursing budget support. IFC is planning about $2.1 billion in investments and MIGA expects to grow its engagement, including under the World Bank Group Guarantee Platform. Subject to the Board's approval of new operations and availability of IDA resources, this implies a total financial package of over $16.6 billion in undisbursed and future commitments available over the next three years.

The World Bank Group extends its deepest sympathies to the people of Ethiopia following the devastating landslide in the Gofa Zone, which resulted in the tragic loss of life, the displacement of many people and destruction of infrastructure. We stand ready to assist Ethiopia respond to and recover from this tragedy.

* IDA was established in 1960 and helps low-income countries by providing grants and low to zero-interest loans for projects and programs that boost economic growth, reduce poverty, and improve people's lives. IDA is one of the largest sources of assistance for its 75 client countries, 39 of which are in Africa. Since 1960, IDA has provided $552 billion to 115 countries. Annual commitments have averaged about $36 billion over the last three years (FY21-FY23), with about 75% going to Africa. Learn more online: IDA.worldbank.org. #IDAworks

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