Ethiopia’s Reform Prompts WB to Provide Budgetary Support

Addis Ababa January 18/ 2019 The reforms underway in Ethiopia have prompted World Bank (WB) to provide the country with biggest budgetary support in Africa. 

The World Bank has approved the first substantial amount of budgetary support to the tune of 1.2 billion USD for Ethiopia following a comprehensive package of reforms the country has so far conducted.

Over the last two years concessional loans, half grant and the rest in loan, with less than 0.75 percent interest, 38-40 years of repayment period with 7 years of grace period have increased, Communication Director at the Ministry of Finance, Haji Ibsa said.

“The World Bank’s (concessional) loans are over half grant and the rest in loan, with less than 0.75 percent interest, 38-40 years of repayment period with 7 years of grace period,” he said.

He stated that Ethiopia has drawn the attention of international organizations as it has retained its peace and registered unanticipated growing diplomatic thaw with Eritrea after the new leadership assumed political power.

“The grant and loan for Ethiopia from World Bank has increased following reforms and our performance in the projects in accordance to our agreement,” adding that it has shown 145 percent increase in 2018 compared to the previous fiscal year, according to the director.

The Bank has approved 1.2 billion USD in grants and loans on 30th October 2018, to expedite Ethiopia’s rapid economic growth.

The 600 million USD loan and the additional 600 million USD grant is approved to support the ongoing reforms in the financial sector and to improve the investment flow into the country, it was learned.

A renowned economist, Zemedneh Negatu, said the 1.2 billion USD from World Bank is the first ever, probably the biggest budgetary support in Africa so far which means that government can apply it as part of its budget expenditure.

“They supported Ethiopia because they believed that ongoing economic and other reforms are worth supporting for the bank, the EU and others. The 1.2 billion USD from is the first and probably the biggest budgetary support for an African country,” Zemedneh said.

He added that global powers that have big shareholders in World Bank are by proxy supporting the reform in Ethiopia, as the bank cannot disperse money without their prior approval.

“It is gratifying to see global powers supporting but it is our responsibility to convert it by applying it into profitable projects and incentives that could ensure the benefit of our country,” the economist said.

The country has, therefore, needed to create conducive business climate especially for private sectors by improving the Ease Doing Business, he recommended. 

Moreover, it has also to focus on national structural transformation keeping in track with agriculture led industrialization, value addition and export led trade, effective management of urbanization and empowering the working force, he added.

Ethiopia’s debt to GDP is moderate now and the country can borrow money from non-private lenders like the World Bank as concessional loans to build infrastructures that could generate revenue.

The five World Bank Group share a commitment to reducing poverty, increasing shared prosperity, and promoting sustainable development.