WASHINGTON, July 5, 2011 — The World Bank’s Board of Directors today approved a US$150 million loan that could see more than 2.8 million Ethiopians benefit from better urban governance, infrastructure, and public services.
The new loan will scale up the support provided through the Ethiopia Urban Local Government Development Project (ULGDP) for performance improvement in the planning, delivery, and sustained provision of priority municipal services and infrastructure by urban local governments. Nineteen cities comprising about 42 percent of Ethiopia’s urban population are receiving performance grants for infrastructure, and another 18 cities will receive capacity building support to prepare them for future investment financing.
During the initial three years of ULGDP, the participating cities performed better than had been anticipated when the project was designed. Citizen participation in investment planning has increased, and investment plans are closely aligned with the expressed priorities of citizens. Most cities are also recording strong gains in own revenue generation, asset management, audit backlogs, and infrastructure development. The cities are also regularly disseminating information to the public through a variety of media. Cities have also constructed or upgraded their infrastructure.
“Based on this excellent performance, the Government of Ethiopia requested Additional Financing from the World Bank to strengthen further urban governance as well as expand infrastructure and service delivery in the 19 original cities, and to extend the scope of the project to another 18 cities,” said H.E. Ato Mekuria Haile, Minister of Urban Development and Construction.
Launched in 2008, ULGDP complements earlier support provided through the Capacity Building for Decentralized Service Delivery project (CBDSD), which focused on capacity building for urban reform, and through the Public sector capacity Building Project (PSCAP), which helped build cities’ capacity within the broader process of civil service reform.
“The ULGDP has gone beyond just providing municipal infrastructure. It is strengthening systems of cities as empowered local governments,” said Greg Toulmin, Acting World Bank Country Director for Ethiopia. “The World Bank and other partners have made a long-term commitment to this emphasis of the Government of Ethiopia on strengthening municipal governance. In face of Africa’s rapid urbanization process, ULGDP will have important lessons for other countries across the Region tackling the challenge of managing their ever growing cities and towns.”
The ULGDP performance-based grant is having a transformative effect, especially on the 18 participating cities outside of Addis Ababa. For the first time, these cities have access to transparent, predictable funding, as long as they meet objective performance criteria. City governments can now have meaningful consultations with citizens about priority needs and plan for them accordingly, as they know that funds will be there.
The majority of the funds have been used by cities to finance roads, especially cobblestone roads. These have improved access and mobility, beautified neighborhoods, increased property values and tax revenues, created local jobs, particularly for youth and for women.
“ULGDP has given participating cities means and incentives to focus on critical areas of city management, in particular participatory planning and budgeting, budget execution, financial management, asset management, and revenue enhancement,” said Abebaw Alemayehu, the project’s Task Team Leader.
The ULGDP will continue to be coordinated and managed by the Ministry of Urban Development and Construction (MUDC), which is also supported by Germany.
The new credit, which is aligned to Ethiopia’s new Growth and Transformation Plan for 2010/11– 2014/15, is provided on standard International Development Association (IDA) terms, with a commitment fee of 0.5 percent, and a service charge of 0.75 percent over a 40-year period of maturity, which includes a 10-year grace period.
As of end-June 2011, the World Bank and Ethiopian Government’s partnership includes 26 IDA-financed operations with a total commitment amount of US$ 4.05 billion.