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World bank to directly support Ethiopia

The World Bank and other development partners announced they will begin providing direct budget support which was suspended 13 years ago, after the 2005 election.
During his latest press conference Prime Minister Abiy Ahmed (PhD) said international partners were attracted by improvements in peace and security and political reconciliation. In 2005, the World Bank and other donors suspended direct budget support to the Ethiopian government following a post-election crackdown on demonstrators that left 200 people dead, tens of thousands detained, and dozens opposition leaders and journalists in jail. At the time, donors expressed fears of ‘political capture’ of donor funds by the ruling party.
Yet aid was soon resumed under a new program, ‘Protection of Basic Services’, which was changed to ‘Promoting Basic Services (PBS)’, both have similar purposes and channeled money directly to district governments.
These programs made impressive strides in education, health, agriculture, water and rural roads, without giving direct support to the federal government.
With regards to direct budget support the government is responsible for managing funds for any purpose.
However opposition groups and human rights organizations said that financial assistance to the government was being used to finance repression. This led partners like the Austrian Development Cooperation, the Africa Development Bank, the UK’s Department for Intentional Development, the European Union, the Italian Agency for Development Cooperation, and the World Bank to refrain from direct budget support and later introducing PBS to allow them to track the financial aid.The federal government via the Ministry of Finance and Economic Cooperation (MoFEC) is responsible for submitting an audit report under relevant guidelines for World Bank financed projects.
According to Abiy, for the first time the WB has agreed to provide direct budget support, amounting to USD 1 billion, in the coming months. Haji Ibsa, Public Relations Head at Ministry of Finance and Economic Cooperation, hopes the agreement to release the finance may occur in September.
“Because the country’s political condition has improved  international partners are pledging to support us,” Abiy added.
Some sources said the WB agreed to approve USD 2 billion in  different phases.
An expert at MoFEC, who wants to be anonymous, told Capital that the WB finance is a good start for supporting the economy. “It will be directly managed by the government which will allow them to  undertake some of projects without the partners’ consent and in areas that may not directly be affiliated with basic services,” an expert at MoFEC with over 40 years of experience, explained.
Experts said that the direct budget support is being provided at a pro-poor interest rate with a long term grace period and payment period.
Currently in PBS III there are three programs called A, B and Enhancing Shared Prosperity through Equitable Service (ESPES), which are promoting basic service and improving the quality of government services at regional and local levels, strengthening the capacity, transparency, accountability and financial management government at regional and local authority levels, and improving equitable access to basic service and strengthening accountability and institutionalizing critical systems at the decentralized level respectively.
The MoFEC expert said that the recommencement of the direct budget support would not stop the PBS program. “We have signed the three year PBS III project extension in January and it will continue for the coming three budget years,” he added.
The program looks at policy conditions and macro-economic indicators like exchange rates and balance of payment.
In the past such kind of direct budget support would use analysis from the  International Monetary Fund (IMF) consultation on the macro economy, which is well known as Article IV, that indicates the condition of the country’s economy. “I think the previous format will be applicable on the current budget support process,” the MoFEC expert added.
With the PBS they were not using such kind of macro-economic indicators, while partners directly provided support.
This will also help with the government’s plan to partially privatize some businesses.


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