Ethiopia signs $1.3bn World Bank deal shortly after IMF praise

Ethiopia has entered a $1.3 billion deal with the World Bank to improve governance and fund pro-poor policies in regions worst hit by a drought and food shortages.

The global lender on Friday (September 29) announced that it had signed the loan and grant agreement.

Breakdown of $1.3bn facility

Of the total amount, $700 million would be used to “improve equitable access to basic services and strengthen accountability” in education, health, agriculture and other sectors.

The remaining $600 million was 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, a statement added.

IMF praise but caution for Ethiopia

The latest development comes on the heels of International Monetary Fund (IMF) praise and caution for Addis Ababa, after a team visited the country between September 13 and 26.

The IMF in a statement praised Ethiopia’s economic strides for the year 2016/2017 but has also urged that reforms be undertaken to improve the business climate.

In a release issued after its staff visited the East African economic powerhouse, the global lender also lauded the resilience of the Ethiopian economy despite fall in global prices for key exports and what it said was a ‘re-emergence’ from drought.

The IMF team headed by Julio Escolano visited Addis Ababa between September 13 to 26 this year. During their work, they met with relevant authorities within the financial sector among others National Bank of Ethiopia Governor Teklewold Atnafu and Minister of Finance and Economic Cooperation Abraham Tekeste.

“The current positive investor sentiment towards Ethiopia could be enhanced by reforms to improve the business climate. A more flexible exchange rate would help competitiveness. Improving economic statistics would support policymaking and investor confidence,“ leader of delegation said.

Ethiopia’s humanitarian crisis due to drought

Ethiopia has reported needing urgent humanitarian assistance for about 8.5 million people who are affected by a severe drought. The drought is one that has affected the entire region – Somalia and Kenya, both declared famine a natural disaster in particular regions.

The failure of successive rainy seasons, blamed by meteorologists on fluctuations in ocean temperatures known as the Indian Ocean Dipole (IOD), has created a series of severe back-to-back droughts in the Horn of Africa region.