World Bank Backs Ethiopia’s Reforms to Promote Sustainable, Inclusive Growth

by Ajao Joseph

The World Bank’s Board of Executive Directors approved today the Ethiopia First Sustainable and Inclusive Growth Development Policy Operation to support home-grown reforms that will ultimately help the country transition to a more inclusive economy, allowing the private sector to contribute more strongly to growth.

In a press release it issued, the WB said: “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 USD grant and 500 million USD concessional credit from the International Development Association (IDA).”

The WB said 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 WB explained that 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.

World Bank Country Director for Eritrea, Ethiopia, South Sudan, and Sudan, Maryam Salim said “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.”

The operation also helps promote sustainable land and forest management and expand access to renewable energy, it said.

“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 USD in concessional financing each year from IDA with roughly half of this as grants.

It also mentioned that the IDA commitments now stand at 15.5 billion USD, with almost 7 billion USD available to disburse. The International Finance Corporation’s (IFC) investment portfolio is 320 million USD. The Multilateral Investment Guarantee Agency (MIGA) is actively engaged with 1.15 billion USD in guarantees.

Looking ahead, the World Bank is committed to supporting Ethiopia’s aspiration of becoming a middle-income country, the press release affirmed.

IDA expects to provide around 6 billion USD 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 USD in investments and MIGA expects to grow its engagement, including under the World Bank Group Guarantee Platform.

According the WB, 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 USD in undisbursed and future commitments available over the next three years.

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