Ethiopia’s House of People’s Representatives has approved a USD 600 million loan agreement with the International Development Association (IDA), the World Bank’s concessional lending arm, during a special parliamentary session held on Friday.
The approval came just hours after the Council of Ministers reviewed and endorsed three financing agreements signed with the IDA, stating that the agreements are consistent with Ethiopia’s borrowing policy, according to the Prime Minister’s Office.
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The approved loan forms part of a USD 1.45 billion financing package that the World Bank has committed to support Ethiopia’s ongoing economic reform agenda through direct budget support.
According to documents presented to Parliament, the financing package consists of USD 850 million in grants and USD 600 million in concessional loans. Of the grant component, USD 200 million is being provided through the World Bank’s Crisis Response Window, a facility designed to assist countries facing severe economic shocks, public health emergencies, or natural disasters.
The government said the financing will support reforms across several sectors, including public finance and trade, fiscal transparency, social protection, climate resilience, energy, infrastructure, and agricultural input markets.
Documents reviewed by lawmakers indicate that the proceeds will be deposited directly into the federal treasury and used to finance the national budget.
The federal government plans to finance approximately 17 percent of its ETB 2.34 trillion budget for the 2019 Ethiopian fiscal year through foreign grants and loans. The budget anticipates receiving ETB 193.7 billion from development partners, including direct budget support from the World Bank.
When presenting the budget to Parliament earlier this month, Finance Minister Ahmed Shide said the government would continue strengthening cooperation with development partners while increasing external resource mobilization. He noted that budget support from development partners had been incorporated into government revenue projections.
The approved IDA loan carries highly concessional terms. According to the loan agreement, the financing is interest-free, although Ethiopia will pay a 0.75 percent annual service charge on disbursed funds. The agreement also allows the World Bank to impose a commitment charge of up to 0.50 percent per year on undisbursed balances.
The loan has a 31-year repayment period, including a six-year grace period, providing Ethiopia with long-term concessional financing as it continues implementing its economic reform program.
