Feature Article Feature Article

Ethiopian and the World Bank Economic Cooperation – Past and Present

Introduction                                                

 

In the past decade, the Ethiopian economic, social and political environment has been changing steadily on the back of the annual double-digit economic growth witnessed throughout the period. The pro-poor economic strategy implemented by the government in the past decade resulted in the lifting out millions of citizens from extreme poverty which paves the way to middle-income country status in 2025.

 

The progress observed in the country was not only limited to fast economic growth, but this was achieved on the background of stable macroeconomic environment. As witnessed by various studies and analytical works related to the performance of the Ethiopian economy, Ethiopia's growth is what could be classified as shared-growth. That is why Ethiopia’s fast economic growth is also distinctive in its nature since it benefited millions of poor citizens from the economic boom.

 

The achievement being witnessed in Ethiopia is a result of appropriate policies and strategies, government commitment, effective implementation strategy, mass mobilization of the population to the cause and very supportive development partners. One such supportive development partner is the World Bank Group.

 

In one of its recent reports (World Bank, 2015), the Bank states the following about the country's achievements in the past years as follows: the World Bank witnessed Ethiopia’s accelerated economic growth and its positive effect on the citizens particularly, towards the poor. The report states:- 

 

“Ethiopia has witnessed rapid economic growth, with real gross domestic product (GDP) growth averaging 10.9% between 2004 and 2014, which is lifting the country from being the second poorest in the world in 2000 to becoming a middle income country by 2025, if it continues its current growth trajectory.This pace of growth is the fastest that the country has ever experienced and it also exceeds what was achieved by low-income and Sub-Saharan African countries in that period.” 

 

Thanks to the Ethiopian Government pro-poor focused economic and development strategy and its development partners who have been working aligned with the government’s strategic plan, a remarkable economic growth has been achieved. To this effect, the contributions of multilateral and bilateral development partners were tremendous.

 

Thus, this article is devoted to highlighting the contributions of one of Ethiopia’s development partners namely, the World Bank. In this article, we will assess the economic cooperation and partnership of Ethiopia and the World Bank Group in brief.

 

 

 

 

Background Story

 

As a founding member of the World Bank, Ethiopia has a long standing partnership and cooperation with the World Bank Groups since 1945. When we talk about the World Bank Group, we find out that it consist five organizations. The organizations are:

  • The International Bank for Reconstruction and Development (IBRD)
  • The International Development Association (IDA)
  • The International Finance Corporation (IFC)     
  • The Multilateral Investment Guarantee Agency (MIGA)
  • The International Centre for Settlement of Investment Disputes (ICSID)

 

Ethiopia became the founding member of the International Bank for Reconstruction and Development (IBRD) in 1945. Ethiopia was the first African Country to receive funding from the World Bank in 1950. The first two funding for Ethiopia were a US$ 5 million credit for rehabilitation and maintenance of roads and a US$ 2 million credit for the establishment of a Development Bank (World Bank, 2014).

Ethiopia joined The International Development Association (IDA) in 1960,The Multilateral Investment Guarantee Agency (MIGA) in 1990 and The International Finance Corporation (IFC) in 1997 (Ibid).     

Thus, starting from this time, Ethiopia received development aid and loan from International Financial Corporation, International Development Association, and other multilateral financial institutions (A Brief History of Ministry of Finance, 1984. Unpublished).

Since then, the economic cooperation and development partnership between the two parties has been increasing in depth and width in major economic sectors such as in infrastructure, agricultural development, and basic servicesjust to name a few of the main areas of cooperation. Ato Fisseha Aberra, International Financial Institution Cooperation Directorate Director, in Ministry of Finance and Economic Cooperation said that the cooperation between Ethiopia and the World Bank gained momentum especial in the past 25 years.

He farther explained that both parties have been working with a common agenda and framework in a win – win manner since they share critical mutual goals. The Ethiopian government is very appreciativeto have the opportunity to work with such dependable development partner like the World Bank which is always ready to support the various development efforts not only in Ethiopia but also in other developing economies, he added. Moreover, from the perspective of the  World Bank he believes that Ethiopia is a reliable partner in implementing each of the World Bank’s Country Partnership Strategy thereby contributing to the success of the Bankin its endeavor to achieve the Bank's two goals namely, to end extreme poverty and to promote shared prosperity at the global level.

 

Cooperation Framework

The economic cooperation and development partnership between Ethiopia and the World Bank have been guided by mutual frameworks with a shared development agenda and common understanding. However, the World Bank’s two goals (World Bank, 2014) have been fundamental as guiding lines in accomplishing its mission and vision at the global level. Two fundamental goals of the World Bank are:-

  1. To end extreme poverty: at the global level within a generation, so that the percentage of people living with less than $1.25 a day to fall to no more than 3 percent globally by 2030
  2. To promote shared prosperity: that is a sustainable increase in the well-being of the poorer segments of society, specifically to foster income growth of the bottom 40 percent of the population in every country.

 

Moreover, the cooperation and partnership has been guided by Country Partnership Strategy (CPS) which is developed to serve in a given period of time by the World Bank in line with Ethiopia’s Government strategic plan. The current Country Partnership Strategy (World Bank, 2012) of the World Bank for Ethiopia that serves from year 2013 to 2016 has two pillars and seven strategic objectives that directly or indirectly align with the country’s poverty focused development plan. The two pillars and seven strategic objectives are listed below.

 

The Pillars

  • Fostering competitiveness and employment
  • Enhancing resilience and reducing vulnerabilities

 

The Strategic Objectives

  • A stable macroeconomic environment
  • Increased competitiveness and productivity
  • Increased and improved delivery of infrastructure
  • Enhanced regional integration
  • Improving the delivery of social services
  • Comprehensive social protection and risk management.
  • Good governance and state building.

 

Pillar one aims to support Ethiopia in achieving strategic objectives one to four while pillar two aims to support Ethiopia through strategic objectives five and six. The CPS also focuses on strengthening the institutional frameworks good governance and state buildings as well as gender and climate change as cross cutting issues in line with the GTP. Moreover, the seven strategic objectives are identified by which each operation’s impact can help end extreme poverty and boost shared prosperity in Ethiopia.

                                                                        

Strategic Alignment

Throughout the long standing economic cooperation and development partnership between Ethiopia and the World Bank, the strategic objectives of both parties are generally aligned with each other. As a result, when we look at the first Growth and Transformation Plan of Ethiopia and the year 2013-16 Country Partnership Strategy of the World Bank, most of the pillars and strategic objectives show a lot of coherence.

 

In a report (World Bank, 2014) to assess the year 2013-16 CPS the World Bank asserted how the Country Partnership Strategy goes in line with the poverty focused strategy of the Government in the following quotation:-

 

“WBG country strategy is well aligned with these ongoing drivers of poverty reduction: 46% of commitments (US$ 2,820 million) are focused on agricultural growth and helping the poorest meet their basic needs, and a further 38% (US$ 2,354 million) in dimensions that make such spending more effective (increasing the capacity of GoE to provide basic services and creating an enabling environment for growth)”.

 

Moreover, the next table shows in detail how the World Bank disbursement portfolio in the same CPS period aligned with the Ethiopia’s Government pro-poor development programs.

 

How the WBG Portfolio Contributes to the Two Goals for Ethiopia

 

No of projects

Commitments US$ M

 

Types of  poverty focused programs

12

1406

Increase the capacity of the GoE to provide public services

11

2018

Targeted programs that help the bottom 40% meet basic needs

 8

  659

Reduced vulnerability of households

 6

  802

Growth in agriculture

 4

  948

Create an enabling environment for growth

 3

  137

Growth in employment in manufacturing and services

 2

  165

Targeted programs that help the bottom 40% grow their incomes

 

 

 

 

 

 

Conclusion

 

When we look at the development partnership and economic cooperation between Ethiopia and the World Bank, we come across a historical attachment lasting more than half a century. Being a founding member of the World Bank, Ethiopia has been enjoying a long standing partnership and cooperation with the Bank since 1945. These days the two party’s partnership has reached a very high level which is considered as exemplary in the recipient – donor type of cooperation.

 

The strategic guide lines and the shared vision are those bind the partnerships with common agenda and understanding in achieving broad-based economic growth and poverty eradication focused development trajectory. The GTP and the CPS are the key frameworkswhich align the collaboration between Ethiopia and the Bank.

 

Thus, Ministry of Finance and Economic Cooperation is looking forward to continue the fruitful development partnership and economic cooperation with the World Bank as a dependable partner so as to achieve the targets set by the country for 2025.

 

Moreover, this is the time when Ethiopia needs development finance crucially to accomplish the plan in GTP II especially, in infrastructure building and economic transformation. The World Bank, which had been reliable and trust worthy development partner to Ethiopia in the past half a century is highly expected to play its decisive role as global development partner to continue on its mission.

 

 

References

  1. A Brief History of Ministry of Finance, 1984. Unpublished, MoFED.
  2. Ethiopia and the World Bank – Over half a century of partnership towards sustainable development - 2014, The World Bank, Ethiopia.
  3. Country Partnership Strategy for the Federal Democratic Republic of Ethiopia (2013-2016), Report No. 71884.ET, August, 2012.
  4. Country Partnership Strategy Progress Report (FY2012-FY2016), Report No. 90893.ET, October, 2014.
  5. Ethiopia’s Great Run – The Growth Acceleration and How to Pace It, Report No. 99399.ET. November, 2015. The World Bank Group.
  6. WWW.worldbank.org/et