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World Bank requests Ethiopia to prepare for debt risks

The weight of public spending concerns the Bank 

World Bank Group officials have expressed concerns over the rising level of debts in Ethiopia and suggested the need for a proper risk management aimed at employing a transparent approach.

Concluding a three-day official visit, Sri Mulyani Indrawati, managing director and chief operating officer of the WB group, told reporters on Wednesday that with the mounting level of debts, Ethiopia needs to be prepared for risks. According to the Ministry of Finance and Economic Development (MoFED), the current level of outstanding public debts rest at some USD 20 billion, out of which the external debt figures stood at some USD 12 billion last year. The debt to the Gross Domestic Product (GDP) ratio remains at 44 percent, yet that, according to WB officials, is low compared to other nations.
The managing director told reporters that one of her discussions was directed towards reforming the governance and regulatory framework, transparency and efficiency of the economy. With Prime Minister Hailmariam Desalegn, she discussed the role of state-owned enterprises. She mentioned that state-owned enterprises are expanding fast in Ethiopia. Indrawati said within the past couple of years, the investments made by state-owned enterprises kept rising.  For the mounting level of debt, according to Indrawati, Ethiopia needs to be sure whether it can deter the risks of increasing debts. “A good and sound financial report, transparency and consistency  and credible information are very important,” she said. “The current borrowing trend definitely will create additional exposure of risks for Ethiopia,” the managing director warned. Making matters difficult, Ethiopia’s export performance is questioned for debt financing abilities. According to the government, the performance targets have been declining for a couple of years. The worst performance was recorded in the past three years.

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The World Bank's "Africa Pulse" report, an analysis of the issues shaping Africa's economic prospects which comes out every two years, has underlined that despite disparity in growth rates in Africa "several countries within the "non-resource rich" county group have achieved sustained high growth rates for over a decade; Ethiopia, Mozambique and Rwanda have registered rapid economic growth for over a decade."

The report, which was launched on Tuesday (October 8) noted: "Economic growth in Sub-Saharan Africa (SSA) remains strong with growth forecasted to be 4.9% in 2013. Almost a third of countries in the region are growing at 6% and more, and African countries are now routinely among the fastest-growing countries in the world." The major drivers of growth are identified as rising private investment and remittances worth US$33 billion a year supporting household incomes.The report believes GDP growth in Africa will continue to rise and reach 5.3% in 2014 and 5.5% in 2015. The report also indicated that strong government investments and higher production in the mineral resources, agriculture and service sectors are supporting economic growth. The report, however, noted that poverty and inequality still remains major challenges to Africa's growth and it underlined the need to sustain growth in order to continue the efforts to lift populations out of poverty.

Source: ethiopia.gov.et

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Ethiopia, a country highly vulnerable to extreme weather events, land degradation, deforestation and food insecurity, is stepping up its efforts to fight climate change, promote sustainable rural development and build resilience.

On Friday, two agreements were signed between the Government of Norway and the World Bank to provide significant financing for sustainable land management, climate-smart agriculture and forest protection in the country.

The first agreement injects an additional US$50 million grant funds from the Government of Norway through a trust fund to co-finance the Sustainable Land Management Program (SLMP II) aimed at reducing land degradation and increasing land productivity of smallholder farmers.

In the second agreement, Norway provides US$13 million through the World Bank’s BioCarbon Fund (BioCF) to support Ethiopia’s Climate Resilient Green Economy (CRGE) Facility and to promote climate-smart agriculture, forest protection and land rehabilitation at the landscape level.

Norway’s contribution complements initial funding of US$5 million from the United Kingdom’s Department for International Development (DFID), and ongoing financing from the Forest Carbon Partnership Facility (FCPF).

"Norway is pleased to collaborate with the World Bank in supporting Ethiopia's ambitious efforts to fight land degradation, deforestation and climate change while promoting sustainable development in the land use sector,” said Tove Stub, Charge d`affaires a.i., Royal Norwegian Embassy in Addis Ababa.

The two complementary programs have the potential to protect the natural resource endowment and to promote climate-smart land use in order to adapt and mitigate climate change and increase food security and resilience in a vast area of the country."

Under SLMP II, the Government of Ethiopia is building on the remarkable progress achieved during implementation of the program’s first phase in reducing land degradation and increasing sustainable land and water productivity.

Under SLMP I, which started in 2008, over 190,000 hectares of degraded communal and individual farmlands have been rehabilitated and agricultural productivity has improved in areas that were hitherto found to be less productive.

SLMP II, a blended IDA credit (US$50 million) and GEF grant (US$14 million) with co-financing from Norway (US$50 million), scales up earlier achievements.

The ongoing process to reduce deforestation and forest degradation (REDD+), a key pillar of Ethiopia’s fight against climate change, will be significantly strengthened with support from the BioCarbon Fund.

This program will enable Ethiopia to fully finance its ongoing REDD+ readiness process and to develop a REDD+ pilot program at a Regional State level.

It will also provide advisory services to the CRGE Facility, in particular to enhance access to climate finance for REDD+ and other land-based activities.

"These funds will allow Ethiopia to become ready for REDD+ and will provide for an ambitious landscape-level program to address the causes of deforestation in the most forested region of our country, while also promoting social benefits to local communities,” said Sileshi Getahun, State Minister, Ethiopian Ministry of Agriculture.

The BioCF’s new initiative provides an important boost to the activities of the CRGE Facility, which was established by the Government of Ethiopia to spearhead national efforts to reach carbon neutrality by 2025.

"The World Bank expects that these two initiatives, including others not mentioned here, will contribute significantly to Ethiopia's efforts to deal with three of the most daunting challenges of our times: land degradation, deforestation and climate change. It is also a good opportunity for the Bank to share its global expertise on climate finance to provide advisory support to the CRGE Facility. These two initiatives strengthen the Bank's partnership for Ethiopia's sustainable development,” said Guang Zhe Chen, World Bank Country Director for Ethiopia.

Source: World Bank
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Education ministers from Ethiopia, Guinea, Liberia, Mozambique, Nigeria, Rwanda, Senegal, Sudan and Tanzania are meeting in Addis Ababa, with experts from Brazil, China, India and Korea to discuss how to produce market-relevant skills in Africa.

“Africa is rising. To realise this exciting prospect, the continent needs to invest in skills and higher education, especially science and technology,” said Mr Ritva Reinikka, the Director for Human Development in Africa at the World Bank.

“Higher education needs to be much more responsive to the needs of the private sector and I think that a partnership with emerging countries is a step in the right direction.”

According to the World Bank, scarcity of market-relevant skills was one of Africa’s greatest challenges of the time.

The purpose of the regional meeting is to strengthen collaboration between sub-Saharan Africa and partners from Asia and Latin America in Technical and Vocational Education and higher education in applied science, engineering and technology.

“The Indian private education sector would be willing to participate in this partnership provided that there is a conducive regulatory environment that makes investment in education a financially viable proposition,” said Mr Shobha Ghosh, the Senior Director, Federation of Indian Chamber of Commerce.

Emerging economies

“Africa can leverage the experience of India, particularly in engineering, science and technology.”

The World Bank has carried out consultations with several African countries on the proposed partnership with selected emerging economies, which were already directly contributing to African’s development as investors.

Many African countries expressed strong interest in the idea.

Opening the meeting, Ethiopia's Deputy Prime Minister Demeke Mekonnen, expressed hope for strong and practical recommendations to strengthen the collaboration between partner countries and Africa, to enhance the contributions of technical and higher education institutions in the economic development of the latter.

The three-day meeting, under the theme; “Partnership for Skills in Applied Sciences, Engineering and Technology in Africa”, organised by the World Bank and the Government of Ethiopia, ends Wednesday..

At the end of the meeting, the delegations are expected to present proposals on skilled labour in priority sectors of their development as well as suggestions for expanding the collaboration with these new partners.

Source: africareview.com
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(Reuters) - Ethiopia should ensure private industry and business has sufficient access to finance in the state-dominated economy to keep growth rates up and shift from a heavy reliance on agriculture, the World Bank said.

The Horn of Africa nation with its strongly state-interventionist policies has one of the world's fastest-growing economies. The government expects growth of 10 percent in the fiscal year ending next month, boosted by rising agricultural output.

Industry, however, accounts for only about 10 percent of gross domestic product, while major sectors of the economy such as banking and telecoms remain in state hands.

Guang Z. Chen, the World Bank's country director, said Ethiopia should adjust policy to expand the private sector to meet a goal of middle-income status by 2025. The bank has defined a middle-income nation as one with gross national income per capita of more than $1,025 (661.6 pounds) per year and put Ethiopia's at $370 in 2011.

"For this country to continue to grow I strongly believe industry has to take a much bigger role because there is no other country that I'm aware of, aside from these resource-rich countries, that can go to middle-income status with still 50 percent of GDP on agriculture," he told Reuters.

"But unfortunately it (the industrial sector) has been rather stagnant, at about 10 percent of GDP," Chen added.

State-supported energy and transport projects required financing equivalent to 19 percent of Ethiopia's estimated $33 billion annual national output last year, squeezing out private business, according to World Bank estimates.

Credit to the private sector was equivalent to 14 percent of GDP compared to a regional average of 23 percent, the bank says.

"Making credit available for the private sector is certainly one area the government can do more on," Chen said.

In the five years to July 2012, private consumption declined from 85 percent of GDP to 77 percent, bank figures show. The total investment rate rose from 16.4 percent of GDP to 25.5 percent between 1987 and 2011, but the proportion of private investment fell in that period.

"The trend that worries us is that while the public investment as a share of GDP is increasing, the private investment as a share of GDP is decreasing," Chen said, adding adjustments could made to the "interventionist model".

Ethiopia, Africa's second-most populous nation after Nigeria, aims to expand the road network to 136,000 kilometres (84,500 miles) by 2015 from below 50,000 kms in 2010. It also plans to build 5,000 kms of railway lines by 2020.

Addis Ababa says it wants to tap the BRICS countries - Brazil, China, India, Russia and South Africa - for investment.

Chen said the nation's transport and logistics would benefit from more a more competitive environment.

"Logistics is mostly controlled by state-owned sectors, that's why we emphasise that there needs to be more competition," Chen said, adding that competition could even be between state-owned enterprises.

Growth has been driven by an expansion in services and agriculture. The main exports include coffee, horticultural products and livestock. Ethiopia is also a big aid recipient.

(Editing by Edmund Blair)

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The World Bank Ethiopia Office released a report on Tuesday (June 18th ) detailing the country's current economic situation and forecasting future prospects.

According to the report, the World Bank acknowledged that Ethiopia had the capability to achieve its target of becoming a middle income country by 2020. The report said that in spite of all the challenges, if Ethiopia continued its current pace of growth, it would join the ranks of middle income countries within the decade. According to lead Economist, Lars Christian Moller, the greatest challenge that will face the country in achieving this target is the fact that private sector investment is lagging behind the public sector.

The report underlined that the current economic growth rate was in good condition and that the country was in good shape to grow further as it had managed to slow the inflation rate down to single digits. The Bank's assessment also took into account positive government efforts aimed at boosting savings while it also urged policy-makers to achieve more in this regard through increasing the number of bank branches, advancing micro-credit institutions and improving the basic income of citizens.

Source: Government of Ethiopia
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