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November 21, 2018

Ethiopia gets US$1.2m boost to accelerate economic growth

Ethiopia is to receive a US$1.2bn boost from the World Bank’s International Development Association (IDA) to help accelerate the country's economic growth and achieve its vision of becoming a lower-middle-income country – a move expected to attract more foreign investment and raise export revenues.

By Hannah Abdulla

Ethiopia is to receive a US$1.2bn boost from the World Bank’s International Development Association (IDA) to help accelerate the country’s economic growth and achieve its vision of becoming a lower-middle-income country – a move expected to attract more foreign investment and raise export revenues.

The funding was approved by the World Bank at the end of October and is in the form of a US$600m grant and US$600m credit.

The government of Ethiopia has recently announced a range of economic reforms designed to revitalise the economy by expanding the role of the private sector. This includes plans to gradually open up the economy and introduce competition to and liberalise sectors that have been dominated by key state-owned enterprises (SOEs). 

The country has a five-year ‘Growth and Transformation Plan’ (GTP-II), which runs to 2020, under which it plans to construct 15 industrial parks with a budget of more than US$1bn. Last month it was reportedly planning to open three new parks dedicated to textile and garment production.

It also opened a second industrial park worth US$146m in Adama – 100km east of the capital Addis Ababa – which specialises in textile and apparel production. Global apparel brands renting sheds include PVH, H&M, Zara and Decathlon. Other parks previously opened in Dire Dawa, Hawassa, Mekele and Kombolcha.

The World Bank says the investment will ultimately attract foreign direct investment and raise export revenues as it helps institutionalise restructuring, introduce high quality services, reduce inefficiencies and operating costs and improve financial performance.  

Doing Business 2018 ranks Ethiopia 161th out of 190th countries globally and 31st in Africa. To improve the investment climate and develop the financial sector, the operation will help the government to streamline business regulations that are favorable to private sector development, facilitate access to credit and establish government bond and foreign exchange markets. The operation will help the government to modernise the financial sector and make the banking system more efficient in its operation. Ultimately this should mean more credit available for the private sector.

Additionally, the operation strives to enhance transparency and accountability by promoting citizen engagement social accountability; and improving the management of state owned enterprises which play a key role in the Ethiopian economy and are critical to the delivery of key public goods and services.

“The government is taking bold steps to strengthen Ethiopia’s growth path and this operation will support the government of Ethiopia’s efforts to improve competitiveness, boost exports, generate jobs and accelerate inclusive growth,” says Carolyn Turk, country director for Ethiopia Sudan and South Sudan.  

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