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 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.

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).

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.”

(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.

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