Ethiopia’s loans from the Bank, coming through the International development Association – the Bank’s interest free facility for 80 of the world’s poorest countries- have been growing by hundreds of millions of dollars every year for the past few years, They have shot up from 640 million dollars in 2011 to 974 million dollars in 2012 and 1.15 billion dollar in 2013.
The latest figure of 1.64 billion dollars is believed to be the largest sum the Bank has ever extended in a single fiscal year to a client country, in this modality.
One of the latest loans, a 250 million dollar agreement signed on May 20, 2014, is the first time the Bank has forwarded financing for industrial zones in Africa. The financing goes towards attracting investment and improving enterprise competitiveness and productivity in targeted industrial zones at the Bole Lemi and Kilinto sites. The second loan, a 180 million dollar agreement also expected to be signed this month, will go towards financing a geothermal project.
“We are investing in the industrial zones because it is a basic instrument in the industrialisation process of the country and it is what is required of a country that aspires to join the middle class,” Guang Zhe Chen, World Bank Country Director for Ethiopia, who signed the agreement with Ahmed Shide, state minister for Finance and Economic Development (MoFED), told Fortune.
The bank believes this investment will enhance the competitiveness of the country, even though prior investments in the sector have had mixed results at best, according to Guang.
“There is only one industrial zone that is fully operational at this time and it is the eastern industrial zone, which is still not fully occupied despite its establishment five or six years back,” he said, adding that he has concerns with the gap in the legal framework and institutional capacity to enable effective and successful implementation of the project that the Bank will finance.
The loan for the geothermal project, through the Geothermal Sector Development Project (GSDP), will bring the total current loans and grants portfolio of Ethiopia to around six billion dollars.
The World Bank is also likely to provide financing in the range of 250 million dollar to 300 million dollars for the 218km Modjo to Hawassa Highway. The government has been looking for financing since 2011, targeting the Africa Development Bank(AfDB), the World Bank, China and Korea as possible sources. The African Development Bank extended a 126 million dollar loan in December 2013 to finance a 56km segment of the 93kms from Modjo to Ziway; the other section is supported by the Korean EXIM Bank. The World Bank’s loan is still in the making, though, according to Guang.
There are 39 countries in Africa which are to benefit from IDA loans; Ethiopia’s credit portfolio at the Bank is exclusively facilitated by the IDA.
Since its inception, IDA credits and grants have totaled 161 billion dollars, averaging seven to nine billion dollars a year in recent years and directing the largest share, about 50pc, to Africa, according to documents from the bank. Ethiopia gets the lion’s share from that.
The IDA loans finance primary education, basic health services, clean water supply and sanitation, environmental safeguards, business-climate improvements, infrastructure and institutional reforms. The IDA has supported 150 projects in Ethiopia to date, including 25 that are now active.