World Bank Cash Injection Takes Total Loans to Record High
The latest loans will help to finance industrial zones, a geothermal project
and, potentially, the Modjo-Hawassa highway
BY MIKIAS MERHATSIDK
FORTUNE STAFF WRITER
28.05.2014
med Shide, stateLatest and expected injection of 430 million dollars from
the World Bank to Ethiopia is bringing the country's total loans for the
year to a record high of 1.64 billion dollars.
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.