The World Bank in Ethiopia

With about 132.1 million people (2024), Ethiopia is the second most populous nation in Africa after Nigeria, and one of the fastest-growing economies in the region, with an estimated 8.1% growth in FY2023/24. However, it also remains one of the poorest, with a per capita gross national income of $1,020.

Economy
Ethiopia's state-led development model improved infrastructure and living standards. Outcomes include expanding nearby potable water access to 60 million more people, doubling electricity access, and a 64% increase in child vaccinations. Between 2004 and 2016, these advances helped reduce the poverty rate from 39% to 24%, but the model relied on overvalued currency, unsustainable debt, and regulations that limited private investment. The approach hurt competitiveness, fueled inflation, and drained resources. It did not boost productivity enough to transform the economy or provide jobs for 1.8 million new job seekers annually, and poverty increased between 2016 and 2021 from 27 to 32%.

Human capital levels have stayed low, and 70% of the workforce depends on agriculture. Global trade integration remains limited, and growing budget constraints reduced social and capital spending. Multiple crises (war in Ukraine, Tigray conflict, droughts, economic imbalances) led to a debt default in 2023. Living standards deteriorated further amid double-digit inflation, and the Tigray conflict displaced 3 million people, resulting in large humanitarian and reconstruction needs ($20 billion). About 15 million people are still reliant on food aid.

The government embarked on comprehensive macroeconomic reform in July 2024, shifting to market-determined exchange rates, removing selected current account restrictions, and introducing a new interest-rate based monetary policy framework. Reforms are supported by IMF and World Bank financing, and G-20 debt relief. While the official and parallel exchange rate spread has narrowed from over 100% to under 10% currently, occasional spikes persist with market inefficiencies, including  surrender requirement on exporters incentivizing continued use of the parallel market. Ethiopia needs to sustain reforms to translate economic improvements into tangible benefits for people: higher earnings, more productive jobs, and better public services.

Last Updated: Oct 10, 2025

The World Bank has a longstanding strong partnership with Ethiopia, working together to advance the country’s vision for sustainable growth and inclusive development. Progress in job creation and improved governance will be needed to ensure that growth is equitable across society. Achieving these objectives will require sustaining macroeconomic and structural reforms to reduce the state’s dominance of the economy, increasing trade integration, and expanding opportunities for private sector growth and job creation. Also needed, reducing the incidence of conflict, not least as the related displacement, loss of livelihoods, and human capital amplifies vulnerability to climate and other shocks that Ethiopia is exposed to. Also key is addressing food insecurity, which is growing due to adverse weather events, reliance on rainfed agriculture, locust invasion, conflict, and global conditions leading to inflation of food prices.

The country’s growing workforce (roughly 2 million people reaching working age per year) puts pressure on the absorption capacity of the labor market, and necessitates improving current jobs, while creating sufficient new jobs.

Ethiopia faces growing risks to its development due to climate change, as highlighted in the 2024 Ethiopia Country Climate and Development Report (CCDR). Annual average losses to gross domestic product (GDP) are expected to range between 1-1.5% of GDP and rise to 5% by the 2040s, potentially pushing millions more Ethiopians into poverty (press release).

The analysis also points to opportunities for growth and increasing prosperity from climate-informed development policies. Ethiopia can shift from being a net importer of agricultural commodities to generating surpluses of as much as 20% (relative to domestic demand), with climate change, especially under potentially warmer and wetter conditions, increasing these surpluses to 25%.

Last Updated: Apr 24, 2025

The World Bank Group’s (WBG) focus is to assist Ethiopia in forging an inclusive and sustainable growth path, supporting the Home-Grown Economic Reform Agenda and 10-Year Development Plan. The WBG prioritizes human capital development, focusing on expansion of basic education, improved youth employment, and enhanced access to markets. Efforts are designed to foster structural transformation and equip the workforce for the future. The WBG is also enhancing resilience and social inclusiveness, expanding social safety nets and investing in sustainable landscapes.

As of Sept. 20, the World Bank portfolio consists of 45 operations (35 national, 10 regional) with commitments of $16.15 billion, ($12.85 billion IDA, $2.43 billion regional integration, and $0.86 billion trust funds). Project areas include agriculture, sustainable land management, healthcare, education, water, and sanitation, energy, transportation, digital development, and trade logistics.

IDA is the largest provider of development assistance, with financial support and evidence-based analytics and advisory services to enhance decision-making and policy implementation. Since FY 2015, IDA has committed $24.3 billion, driving structural transformation and improving living standards.

IFC’s portfolio was $357 million (Aug. 31, 2025), with an advisory portfolio of $41.8 million, covering agribusiness, manufacturing, renewable energy, digital connectivity, financial services, and inclusive finance focusing on SMEs. IFC focuses on sectors that address constraints to growth while promoting inclusion, sustainability, and job creation.

MIGA has a gross exposure of $1.03 billion (Aug. 31, 2025), spanning telecom and manufacturing sectors, including the first privately owned telecommunications network with a unified telecommunication service license, sunflower and soya bean oil manufacturing/distribution plant, flour and pasta manufacturing plant, and seed-oil refining and solvent extraction facilities.

Last Updated: Oct 10, 2025

The Urban Productive Safety Net and Jobs Project covers 1.75 million people in 88 cities, improving income of the poor and promoting labor market inclusion of disadvantaged youth, including refugees, Internally Displaced Persons (IDPs), and hosting communities. 519,955 poor urban residents and 75,000 refugees in 8 refugee camps accessed employment with financial and business skills training. 770,397 IDPs received cash and reintegration/relocation support. 62,000 youth (high school dropouts) received digital skills training and apprenticeship with firms.

The East Africa Skills for Transformation and Regional Integration Project increased access and improved quality of Technical and Vocational Education and Training (TVET) programs in TVET Institutes. There was expansion of Ethiopia’s general education system, growing from 7.1 million students in 2000 to 30 million in 2024.

The Strengthen Ethiopia’s Adaptative Safety Net Project ($1.1 billion) has supported the government’s fifth phase of the rural Productive Safety Net Program from which 8 million people in 492 districts benefit. 6.8 million people receive short-term employment by participating in public works activities. These jobs enable them to earn a living while enhancing their communities’ climate change adaptation and resilience. 1.3 million beneficiaries have opened bank accounts for the first time.

The program reached 825,000 people with trainings in life, business skills, and enterprise development, a cash grant, and credit services.

The OWNP Consolidated WASH Account Project Phase II ($596.3 million) plays a catalytic role in financing, with IDA $300 million attracting $203.3 million from other development partners and leveraging $93 million from the Ethiopian government. The project improved access to water supply service, quality, and sustainability, and provides equitable access to improved sanitation services – targeting 3.8 million people with improved water supply and 4.75 million with improved sanitation.

Last Updated: Oct 10, 2025