Overview

  • Ethiopia’s location gives it strategic dominance as a jumping off point in the Horn of Africa, close to the Middle East and its markets. Landlocked, it borders Eritrea, Somalia, Kenya, South Sudan, and Sudan—its tiny neighbor, Djibouti, is also its main port. Ethiopia’s huge population of about 102 million (2016) makes it the second most populous nation in Africa (after Nigeria). But, although the fastest growing economy in the region, it is also one of the poorest, with a per capita income of $660. Ethiopia’s government nonetheless wants the country to reach lower-middle-income status by 2025.

    Ethiopia’s economy experienced strong, broad-based growth averaging 10.5% a year from 2005/06 to 2015/16, compared to a regional average of 5.4%. The expansion of services and agriculture accounted for most of this, with manufacturing growth only modest. Private consumption and public investment explain demand-side growth, the latter assuming an increasingly important role. Higher economic growth brought with it positive trends in poverty reduction in both urban and rural areas. In the year 2000, 55.3% of Ethiopians lived in extreme poverty, but by 2011 this figure was 33.5%. The economic growth rate recently declined to about 8%. The government is implementing the 2nd phase of its Growth and Transformation Plan (GTP II). GTP II, which will run to 2019/20, aims to continue work on physical infrastructure through public investment projects, and to transform Ethiopia into a manufacturing hub. Growth targets are an annual average GDP growth of 11%; in line with manufacturing strategy, it also hopes the industrial sector will grow by an average of 20%, creating jobs.

    Development Challenges

    The main challenges for Ethiopia are sustaining its positive economic growth and accelerating poverty reduction, which requires significant progress in job creation as well as improved governance. The government is already devoting a very high share of its budget to pro-poor programs and investments. Large scale donor support will continue to provide a vital contribution in the near-term to finance the levels of spending needed to meet this. However, even if donor support is increased, to use aid effectively Ethiopia will need to improve its governance, empower local authorities, and become more accountable to its citizens. To maintain high economic growth, the country needs to identify sustainable ways to finance infrastructure, support private investment through credit markets, and tap into the growth potential of structural reforms.

    Ethiopia has proven resilient. Over the past two decades, there has been significant progress in key human development indicators: primary school enrollment has quadrupled, child mortality been cut in half, and the number of people with access to clean water has more than doubled. These gains, together with more recent moves to strengthen the fight against malaria and HIV/AIDS, paint a picture of more well-being in Ethiopia.

    However, Ethiopia still faces challenges in maternal mortality, nutrition, and gender. While access to education has increased, learning outcomes and the quality of education are not keeping pace with it, and there are regional and gender disparities in basic educational proficiency. Notwithstanding the progress in critical aspects of human development, Ethiopia still needs a considerable amount of investment and improved policies as well to reach its development objectives, given the country’s low starting point.

    Last Updated: Oct 30, 2017

  • World Bank Group (WBG) Assistance to Ethiopia

    The Country Partnership Framework (CPF) FY18-FY22 builds on the progress achieved by Ethiopia during the past five years. The CPF was developed after intensive consultations with a wide range of stakeholders to gain a broad-based perspective on the WBG’s performance and development priorities. The CPF is a result-based strategy, firmly anchored in the government’s Second Growth and Transformation Plan (GTPII).

    The CPF is designed to assist Ethiopia in forging a more inclusive and sustainable growth path. Particularly, it will support a more spatially inclusive approach to development, one that leverages national programs to provide quality services to all areas. The CPF will help promote structural and economic transformation through increased productivity in rural and urban areas by focusing on basic education, access to markets, and job opportunities for youth. It will also help build resilience and inclusiveness (including gender equality) by improving safety nets, investing in productive landscapes, and focusing on the Early Years agenda.

    The CPF will also support institutional accountability and assist in combating corruption by focusing on improving governance and promoting social accountability. The private sector is expected to be a key contributor to Ethiopia’s future development, and the CPF envisages prominent roles for the International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA), the WBG institutions that focus exclusively on it.

    Last Updated: Oct 30, 2017

  • The International Development Association (IDA) is Ethiopia’s largest provider of official development assistance. IDA has committed over $17 billion to more than 75 projects in Ethiopia since 1991, most notably for the protection of basic services, productive safety nets, and roads.

    The WBG has worked to promote economic growth and address systemic poverty challenges across many sectors. IDA’s support for the education sector—including through the General Education Quality Improvement Program (GEQIP) and the Enhancing Shared Prosperity through Equitable Services program—has helped Ethiopia expand access to quality primary education over the last nine years. Primary net enrollment rate increased from 79.1% in 2006 to 99.3% 2016. There has also been a considerable reduction of the gender gap for schooling. The ratio of girls to boys for grades 1–8 increased from 0.84 in 2006 to 0.92 in 2016. The gross enrollment rate for secondary school (grades 9–10) increased from 37.1% in 2007 to 44.8% in 2016. Through its new CPF, the WBG will work to improve the quality of and equitable access to education to address issues including high dropout rates and low learning outcomes, especially for girls.

    Water and Sanitation

    A number of operations have supported access to safe water sources and sanitation services, and the better management of water resources, including giving 4.2 million rural people an improved water supply (from 2013). A $250 million urban water supply and sanitation project is to increase the sustainable water supply and sanitation services in Addis Ababa and selected secondary cities, providing 1 million people in urban areas with improved water sources, 2.7 million with improved water supply services, and 200,000 with sanitation services. A follow-on $445 million IDA credit was approved in March 2017.  Under its new CPF, the World Bank will continue to support GoE’s goal of providing 100% national potable water supply coverage by 2020.

    Roads

    Ethiopia’s development has been held back by a large infrastructure gap—it has one of the lowest road densities in Africa. IDA has invested over $2 billion since 1991 to address that, partly through the Road Sector Development Program (RSDP).  IDA helped build capacity and establish a dedicated road fund for financing maintenance. 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 100,000 km in 2015. Under the new CPF, the World Bank will continue supporting improvements in transport infrastructure and road connectivity to reduce travel times and improve connectivity between markets and secondary cities.

    Last Updated: Oct 30, 2017

  • Official development assistance to Ethiopia has been increasing steadily since 2000. A large number of donors are active in Ethiopia, with external aid of $3.7 billion in 2015. Both the government and the majority of international partners are keen to deepen the harmonization process in the spirit of the Paris Declaration (2005) and Accra Agenda for Action (2008). Ethiopia is a pilot country for the Organization for Economic Co-operation and Development Assistance Committee harmonization agenda, and for the European Union’s initiative on donor division of labor. Partners are currently considering how to build on this progress in light of the Accra Agenda. 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 a few 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.

    The launch of the Expressway Development Support Project (EDSP) marked a historic moment in the WBG’s partnership with Ethiopia, as it is the first project co-financed with China EXIM Bank and South Korea EXIM Bank. The project brings together traditional and non-traditional development partners to work on a single project, with standardized design, safeguards, and joint-supervision.

    Last Updated: Oct 30, 2017

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LENDING

Ethiopia: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments

MULTIMEDIA

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SLIDE SHOW Feb 03, 2016

Improving food security in Ethiopia



PHOTO GALLERY

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In Depth

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Africa's Pulse, No. 16, October 2017

Africa needs to improve the quality of its education and teach basic skills to adults, too, says Africa’s Pulse.

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Monitoring Progress in Policy

IDA, the World Bank’s fund for the poorest, contributes nearly 50% of its funds to 39 African countries.

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International Development Association (IDA) in Africa

IDA, the World Bank’s fund for the poorest, contributes nearly 50% of its funds to 39 African countries.

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Watch, listen and click through the latest videos, podcasts and slideshows highlighting the World Bank’s work in Sub-Saharan Africa.

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Doing Business in Ethiopia

The Doing Business report provides objective measures of business regulations and their enforcement. See where your country ranks.

Additional Resources

Country Office Contacts

Addis Ababa
Gelila Woodeneh
Sr. Communications Officer
Africa Avenue (Bole Road)
Addis Ababa
Ethiopia
+(251) 115176000
gwoodeneh@worldbank.org
Washington
Nicole Klingen
Country Program Coordinator
1818 H Street, NW
Washington, DC 20433
Nklingen@worldbank.org