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Ethiopia inks billion-dollar deal with World Bank
October 12, 2017, 5:21 pm
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Ethiopia and the World Bank signed a deal on 29 September designed to fund the country’s pro-poor policies and improve governance.

The US$1.3 billion loan and grant agreement would see the global lender disburse $700 million as a loan to Ethiopia in order to “improve equitable access to basic services and strengthen accountability” in various sectors, including in education, health and agriculture. 

The remaining $600 million would be given as a grant to finance the East African country’s ‘Rural Productive Safety Net’ scheme, which is handing out cash or food to 8 million people in exchange for participation in public development projects.

Ethiopia has reported needing urgent humanitarian assistance for about 8.5 million people who are affected by a severe drought. The failure of successive rainy seasons has been blamed by meteorologists on fluctuations in ocean temperatures known as the Indian Ocean Dipole (IOD). The inclement weather pattern arising from IOD has created severe back-to-back droughts in the Horn of Africa, including in Somalia and Kenya where famine has been declared in some regions.

Signing of the loan and grant deal with the World Bank comes on the heels of a visit to Ethiopia by a delegation from the International Monetary Fund (IMF) from 13 to 26 September. During their visit the IMF team held discussions with Prime Minister, Hailemariam Desalegn, the Governor of National Bank of Ethiopia Teklewold Atnafu and Minister of Finance and Economic Cooperation Abraham Tekeste among others.

In a release issued after their visit, the IMF team lauded the resilience of the economy and praised the economic measures taken by the government in 2016/17, despite the fall in global prices for key exports and what it said was a ‘re-emergence’ from a debilitating drought situation.

Other high points the IMF delegation raised included growth in the country’s Gross Domestic Product (GDP), prudent budget execution and the narrowing of current account deficit and debt accumulation. The Ethiopian authorities were also lauded in the areas of its drive towards implementation of pro-poor policies, efforts at mobilizing more internal revenue and financial inclusion measures.

Despite the successes, the IMF delegation pointed out some areas that needed attention by the government, including enhancing reforms to improve the business climate and undertaking macroeconomic and financial policies aimed at reducing external imbalances and liabilities. The IMF also noted that a more flexible exchange rate would help competitiveness, while improving the economic statistics would further support policymaking and investor confidence.

 

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