Promoting Economic Growth and Shared Prosperity: Improving Livelihoods, Building Resilience and Creating a Better Future for Ethiopians
International Development Association (IDA) has been Ethiopia’s biggest development partner for over seven decades. This partnership has helped Ethiopia to achieve impressive economic developments. With a real gross domestic product (GDP) growth rate of 7.7% in 2017/18, Ethiopia continues to be one of the world's fastest growing economies. This growth has enabled Ethiopia to reduce the number of people living in extreme poverty from 55.5 percent in 2000 to 26.7 percent in 2016, based on the $1.90 poverty line.
Despite significant progress, Ethiopia is still one of the world's poorest countries. While Ethiopia has achieved most of the Millennium Development Goals (MDGs) and is making progress towards the Sustainable Development Goals (SDGs), given its low starting point, considerable investment and improved policies are needed to help the country reach its development objectives. With two million youth joining Ethiopia’s labor force every year, creating productive and meaningful employment for this burgeoning workforce requires further economic growth and transformation.
Ethiopia’s main challenges are sustaining its positive economic growth and accelerating poverty reduction.
While Ethiopia has made progress on poverty reduction, not everyone benefited equally. Compared to rural areas, there was stronger poverty reduction in urban areas. While median incomes have increased, the poorest 10% of the population has not experienced any real increase in income since 2005.
The Country Partnership Framework (CPF) for Ethiopia for the period FY18 to FY22, approved in June 2017, is designed to support the Ethiopian government’s Growth and Transformation Plan (GTP) II while aiming for the World Bank Group’s (WBG) twin goals of eliminating extreme poverty and boosting shared prosperity, as well as achievement of the Sustainable Development Goals (SDGs).
Current operations focus on:
- Large budget support for an ambitious reform agenda to (i) maximize finance for development; (ii) improve the investment climate and develop the financial sector; and (iii) enhance transparency and accountability;
- National programs on safety nets (urban and rural), agriculture, sustainable land management, basic service delivery (large operation including health, education, agriculture and water sanitation, rural WASH program);
- Programs in energy transmission, road development, urban transport; water/sanitation, job creation, SMEs, trade logistics development, human development, urban development and management and others.
With support from IDA credits and grants, the Government of Ethiopia has made important strides in a number of areas:
The Growth and Competitiveness Program is supporting Ethiopia’s reform efforts both financially and technically since its launch in 2018. The operation focuses on three pillars: maximizing finance for development, improving the investment climate and developing the financial sector; and promoting transparency and accountability. With support from the program Ethiopia has:
- Approved Public Private Partnership (PPP) Proclamation and Directive to establish a regulatory framework and institutions that manage fiscal risks, enhance transparency, fairness and long-term sustainability in implementing privately financed projects.
- Approved a multi-year electricity tariff increase framework with a detailed implementation schedule to improve cost recovery while protecting the poor.
- Lifted foreign investment restrictions in critical logistics services, including freight forwarding and shipping agency services to foster competition.
- Approved the establishment and constitution of an independent regulator for the telecom sector.
- Reduced the number of licensing categories by half from 1300 in 2018 to 519 in 2019, and eliminated the requirement for annual competence certificates for at least seventy percent of trade licensing categories, to reduce the regulatory burden and simplify business entry impacting over one million businesses.
- Approved Civil Society Organizations (CSO) Proclamation to promote greater CSO and citizen participation in the development process.
The Women Entrepreneurship Development Project is helping to unleash the potential of women entrepreneurs. Under the project, from 2012–18, 15,525 women entrepreneurs successfully completed technical, vocational, and entrepreneurship training. They were also provided with financing to help grow their businesses. This helped to increase their average yearly earnings by 28%.
Ethiopia has made significant progress in reaching enrolment targets in primary education, the population of learners increased from 7.1 million in 2000 to 26 million in 2016. Net Enrollment Rate (NER) at primary level is 99%. The General Education Quality Improvement Program for Equity is helping Ethiopia to ensure students receive quality education. Under the program:
- from 2014–18, 117 million textbooks and teachers’ guides were developed, printed, and distributed to primary and secondary schools,
- 321,596 primary and secondary teachers took licensing exams in 2018, up from 30,256 in 2014,
- 18,347 teachers upgraded from diploma to post-graduate diploma in teaching in 2018, up from 652 in 2014,
- 25.9 million students benefited from an enhanced learning method in 2018, five million more than in 2014.
Under the Competitiveness and Jobs Creation Project: in 2018, 2,554 trainees received soft-skills training and over 70% were recruited by factories in Bole Lemi-I industrial park.
Water Supply: from 2014–18, 3.5 million people in rural areas and 338,490 people in urban areas were provided with access to improved water sources.
Under the Sustainable Land Management Project: 855,377 hectares of degraded communal land were sustainably revived through landscape management practices in 2018, up from 304,589 hectares in 2013. 95,247 hectares were restored or reforested/ afforested, up from 36,195 hectares in 2013. During the same period, 3.9 million metric tons of carbon dioxide equivalent were captured incrementally in the restored areas.
The Pastoralist Community Development Project provided 5.1 million pastoralists with access to community demand-driven social and economic services in 2018, up from 1.9 million in 2014.
Working in partnership with other donors, including the European Commission, Germany, Japan, Nordic countries and the United Kingdom, IDA helped increase both the size and quality of Ethiopia’s road network from under 20,000 km in 1991 to over 110,000 km in 2016.
Bank Group Contribution
IDA is Ethiopia’s largest provider of official development assistance and has committed over $20 billion to more than 70 projects in Ethiopia since 1991. The WBG has worked to promote economic growth and address systemic poverty challenges across many sectors. Ethiopia has a large portfolio with current net commitments of nearly $13 billion. This includes close to $11.5 billion for IDA and $1.3 billion in trust funds.
Country Platform: Country leadership in Ethiopia is strong with the Growth and Transformation Plan (GTP), (Ethiopia’s 5 year development plan) at the center of all development partners’ activities.
The WBG, with the United Nations Development Programme and one bilateral donor, is one of the rotating co-chairs of the Development Assistance Group (DAG), the main forum for donor coordination in Ethiopia. Through DAG there are efforts to make progress on the implementation of commitments in the Paris and Accra Declarations, including joint economic and sector work (much of the WBG’s major analytical work has already been prepared with its partners) and joint missions. Much of the collective effort is focused on furthering harmonization through major multi-donor programs and policy areas of importance.
The WBG has taken the lead in developing a set of multi-donor programs to reduce transaction costs, aligning support with the country’s decentralized model, and enhancing the predictability of aid. These instruments allow for large-scale leveraging of International Development Association (IDA) support. Such approaches are used in the Enhancing Shared Prosperity through Equitable Services, the Productive Safety Nets Program 4; the Water Supply, Sanitation, and Hygiene Universal Access Program, the Sustainable Land Management Project II, and the Agricultural Growth Program II.
IDA will give renewed emphasis to key areas of the CPF while exploring additional opportunities to complement current engagements and offering relevant knowledge products. IDA will continue to broaden its support to Ethiopia’s sustainable development endeavors and scale up efforts to help the government to achieve its reform objectives within a stable macroeconomic environment. Creating jobs; increasing agricultural productivity and marketing; facilitating access to financial services; improving access to quality infrastructure – electricity, roads; and improving regional integration will also remain priority areas of engagement. Additionally, it will continue supporting Ethiopia to further maximize finance for development, improve the investment climate and enhance transparency and accountability.
IDA will also continue helping Ethiopia to address gender inequities and create opportunities for girl’s and women’s empowerment in order to fully unleash their potential. Additionally, IDA will help the government build human capital by investing in the Early Years agenda, facilitating citizens’ access to basic services such as education, health and water among other areas. Furthermore, IDA will help Ethiopia to scale up the delivery of social services and develop a comprehensive approach to social protection and risk management. IDA will also help Ethiopia to better adapt to climate change by building its resilience to disasters and promoting sustainable development to minimize vulnerabilities. This includes enhancing the resilience of vulnerable households to food insecurity and increasing adoption of Disaster Risk Management (DRM) systems.
“Because of the project, I am now able to send my four children to school and I have a new corrugated sheet roof on my house,” said Askale Seboka (see below), one of the beneficiaries of the Agricultural Growth Project.
Askale is a farmer in Arsi Zone in Ethiopia’s Oromia region. After her husband passed away, she was barely able to make a living. Although she worked tirelessly on her 0.5 hectare of land, she was barely getting 25-30 quintals ( 2500- 3000 kgs)of potatoes. That all changed four years ago when her village’s irrigation scheme was upgraded under the Agricultural Growth Project (AGP). She received a stable supply of water, improved potato varieties, access to fertilizer and agronomic advice and training on agricultural practices from development agents. This helped to substantially increase her yield. This year she harvested 120 quintals (12,000kgs) of potato from the same 0.5 hectare of land of which she sold 100 quintals (10,000kgs) and kept 20 quintals (2000kgs) for self-consumption.