Ethiopia has secured a $1 billion funding package from the World Bank to support its ongoing economic reform programme and boost economic growth, the country’s Ministry of Finance announced on Friday.
According to a statement posted on the Ministry’s official Facebook page, the financing is aimed at helping the government stabilise the financial sector, improve trade competitiveness, and increase domestic revenue collection.
The World Bank confirmed the deal in a statement, explaining that the package consists of a $650 million grant and a $350 million concessional loan. The concessional loan is expected to have low interest and long-term repayment conditions, in line with the World Bank’s strategy to support low-income economies with flexible financial tools.
The World Bank further revealed that, subject to board approval and availability of resources, its International Development Association (IDA) could provide Ethiopia with as much as $5 billion in new financing over the next three fiscal years.
This announcement comes just days after the International Monetary Fund (IMF) completed the latest review of Ethiopia’s $3.4 billion loan programme. That approval unlocked an additional $262.3 million disbursement for the country.
Ethiopia’s economy, once considered one of the fastest-growing in Africa, has been hit hard in recent years by conflict, high inflation, forex shortages, and rising external debt. In response, the government has implemented a number of reforms under the guidance of both the IMF and the World Bank.
Key among these reforms was the decision in 2023 to float the Ethiopian birr, a major policy shift intended to reduce pressure on the foreign exchange market and eliminate multiple exchange rates. The government has also initiated steps to open its previously closed economy to private and foreign investors, particularly in sectors like telecoms, banking, and logistics.
The IMF, in its recent statement, stressed the importance of continuing structural reforms, especially improving how the foreign exchange market functions, raising domestic revenues, restoring external debt sustainability, and promoting fiscal transparency.
The World Bank also emphasised that the newly signed funding will help deepen structural reforms, support the country’s economic recovery, and provide a buffer against both internal and external shocks. The Bank’s support is expected to be crucial as Ethiopia continues to grapple with challenges arising from post-conflict reconstruction, climate shocks, and macroeconomic instability.
Finance Minister Ahmed Shide has repeatedly stated that Ethiopia’s reform efforts are geared toward building a resilient and inclusive economy, creating jobs, and lifting millions out of poverty. He said the new World Bank financing is a reflection of continued international confidence in the country’s economic direction.
Analysts say the combined support from both the IMF and World Bank signals growing confidence from multilateral institutions in Ethiopia’s policy trajectory, although challenges such as inflation control, debt restructuring, and social spending remain on the table.
The reforms come at a sensitive time for the East African country, which is also seeking debt relief and further support from international creditors. Ethiopia had earlier requested a debt treatment under the G20’s Common Framework in 2021 but has yet to finalise a restructuring deal with its creditors.
