World Bank and Ethiopia Discuss Reform, Peace Deal & Debt Relief Initiative

ADDIS ABABA – World Bank President David Malpass and Finance Minister Ahmed Shide discussed Ethiopia’s need for “critical reforms” to restore macroeconomic stability during their meeting on Friday.

The Ethiopian delegation led by Finance Minister Ahmed is the 2023 World Bank-IMF Spring Meetings, taking place from April 10 to 16 in Washington.

Finance Minister Ahmed and President Malpass covered a range of issues including the progress achieved by the government in the implementation of the peace deal that ended the two-year conflict in the north, the World Bank says in a readout after the meeting.

President Malpass encouraged further steps toward durable peace and prosperity for all Ethiopians.

Following the peace deal, the World Bank regional economic update says the country is seeing an upswing in economic activity attributed to a recovery in investment – with growth rates of 5.9% in 2023 and an average of 6.9% in 2024-25.

The report projects Ethiopia’s real GDP to grow steadily from 6.0% in 2023 to 6.6 and 7.0 percent in 2024 and 2025, respectively.

The report has been seen as a positive for authorities who insist the economy is faring well amid various challenges that have been fueling inflation and debt distress.

Gov’t urged to address economic distortions

Malpass said he discussed Ethiopia’s need for “critical reforms” to restore macroeconomic stability with the Ethiopian delegation.

Authorities have already prepared the second phase of their Homegrown Economic Reform Program.

President Malpass urged policy reforms to be “rapid and decisive” amid the challenging context of drought, internal conflicts, and debt distress.

He also called for measures to address macroeconomic distortions, which will slow inflation and unlock investment, and facilitate private-sector led growth.

Moving away from a state-driven economic model, enhancing business enabling environment, and allowing more competition in the financial sector are also among the measures authorities urged to take during the meeting.

President Malpass emphasized the World Bank Group’s strong support for Ethiopia including budget support in the form of grants and highly concessional credits as the Government implements the reform program, the readout says.

Slow G20 debt relief process

Ahmed and Malpass also discussed debt restructuring processes under the G20 Common Framework – an initiative by 20 major economies in 2020 to deal with poor nations’ debts.

Ethiopia is among the four African economies that signed up to the process three years ago but only Chad concluded the agreement.

Malpass noted the slow progress in the implementation of the Common Framework, urging for a rapid agreement of official bilateral and private sector creditors on debt treatment.

Ethiopia had about $26 billion of external liabilities as of September, mainly from China. The nation spent $1.7 billion in debt service payments in the first half of the current fiscal year alone, according to the government’s report.