News Release No: 2001/366/AFR
WASHINGTON, June 5, 2001--The
World Bank's Board of Directors today approved a US$150 million Economic
Rehabilitation Support Credit (ERSC) to help the government of Ethiopia
stabilize the economy and move back to a sustainable path of growth. Financing
from the ERSC would cover the needs of an economy that is suffering from
the impact of a border conflict with Eritrea, a drought, and a sharp decline
in the terms of trade.
Following the signing of the peace agreement on December 12, 2000, the government resumed its economic and social reform efforts through developing an interim Poverty Reduction Strategy Paper (I-PRSP). The strategy re-affirms the government's main strategic directions for poverty reduction within a framework of macroeconomic stability, emphasis on rural development, improved governance and a strong private sector participation in the economy.
The credit is fully consistent with the I-PRSP and builds on three areas that will be further developed:
- Improving governance through cross-cutting public sector reforms;
- Strengthening public expenditure policy and management; and,
- Fostering private sector development and increasing export competitiveness.
Such activities will help stimulate economic growth to around 7 percent per annum, reduce inflation to low single digits and raise the import reserve cover to about four months. This will require a comprehensive reform of tax policies and administration; increasing expenditure to key social and infrastructure services and a monetary policy geared at containing inflation, while insuring adequate growth in domestic credit to the private sector.
The Economic Rehabilitation Support Credit will be financed by a US$150 million credit from the International Development Association, the World Bank's lending arm for the poorest countries. The IDA credit is on standard terms of 40 years maturity, including 10 years grace.
Contact Person:
In Washington: Sharon Cox (202) 473 2035
e-mail:SCox1@worldbank.org
In Ethiopia: Aberash Begashaw (251-1)
514 200
e-mail:ABegashaw@worldbank.org