The World Bank's Board of Executive Directors has approved a $1 billion Development Policy Operation (DPO) to aid Ethiopia in its transition toward a more inclusive and private sector-led growth model. This initiative, known as the Second Sustainable and Inclusive Growth DPO, builds on a previous operation from July 2024, offering additional financial support for Ethiopia's Economic Reform Agenda. The financing package includes a $650 million grant and a $350 million concessional credit from the International Development Association (IDA).
In July 2024, Ethiopia embarked on comprehensive reforms aimed at reducing macroeconomic imbalances that had accumulated over recent years. Supported by this DPO series, the reform agenda has already achieved early successes such as narrowing exchange rate distortions, improving domestic revenue mobilization, enhancing export performance, and moderating inflation.
The second operation aims to deepen these efforts by promoting better financial intermediation, reducing trade and investment barriers, increasing revenue collections, and ensuring more transparent public finances. It also seeks to expand support for poor and vulnerable groups through reforms that increase income opportunities in rural areas, enhance social protection measures, and improve human capital quality.
"Building on the progress of the first operation, this DPO reinforces Ethiopia’s efforts to accelerate the shift toward a more inclusive, sustainable economy that allows the private sector to contribute more strongly to growth," said Maryam Salim, World Bank Division Director for Eritrea, Ethiopia, South Sudan, and Sudan. "It also maintains a strong focus on protecting the poor from the short-term costs of economic reforms and expanding their opportunities to participate in the economy."
This operation is part of the World Bank Group’s broader engagement in Ethiopia across various sectors including health, education, social protection, energy finance digital development agriculture land transport trade logistics water sanitation urban development. The World Bank Group is one of Ethiopia’s largest sources of development finance providing over $2 billion annually through IDA with a significant portion being grants. IDA's current portfolio totals $15.5 billion with $6 billion still available for disbursement. The International Finance Corporation (IFC) holds an active investment portfolio of $320 million while the Multilateral Investment Guarantee Agency (MIGA) has issued guarantees worth $1.15 billion.
Looking forward the World Bank remains committed to supporting Ethiopia's ambition to achieve middle-income status. Subject to Board approval and resource availability IDA expects approximately $5 billion in new commitments over the next three fiscal years including support for economic reforms through fast-disbursing budget operations.