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The World Bank is once again to start direct budget
support (DBS) to Ethiopia for three years spanning
July 2008 to June 2011. This support will be
implemented alongside its post-May 2005 election
adopted Protection of Basic Services (PBS) approach.
With its latest programme, a.k.a. Country Assistance
Strategy (CAS), the World Bank would not be in a
position to check where the funding goes.
“Ethiopia’s achievements on growth and basic service
delivery are remarkable,” said Ken Ohashi, World
Bank country director for Ethiopia. “At the same
time, sustaining this good performance will require
addressing several looming challenges. The bank will
provide its full support for Ethiopia in this
regard.”
These challenges in the short-term, as outlined in
the CAS, include managing macro-economic risks;
stimulating private investment; opening more
economic opportunities for the disadvantaged groups,
especially women, the youth and households suffering
food insecurity; and improving quality of services.
In the long run, the World Bank advises Ethiopia to
address the fundamental problem of its vulnerability
to drought and to improve its governance.
Following the 2005 election, the World Bank dropped
its DBS scheme and made a transition to the PBS
claiming that there was need for an improvement in
governance. PBS is a programme with a lot of checks
and balances; it gives the Bank the right to ask
whether the funds released are used for the intended
purposes.
“We provide DBS to the government only when we are
comfortable that the country is united, and that the
whole country is behind the government plan,” Ishac
Diwan, the former country director for the World
Bank, had told Fortune two years ago. “If we
provide budget support in the current environment,
there will certainly be accusations that the money
is being used for political purposes and that would
make our programme totally unsuitable.”
The Bank’s Board of Directors had decided to
allocate 215 million dollars to the PBS program in
May 2006, which would run for the following two
years. The fund was allocated for basic health,
education and water services at the local level.
The Bank now believes there is a modest improvement
in governance in Ethiopia.
“The new CAS does signal that there has been some
progress on governance,” Mr. Ohashi told Fortune.
“But it does not mean that there are no longer any
concerns about governance.”
The Bank’s strategy intends to help key elements of
the federal government’s Plan for Accelerated and
Sustained Development to End Poverty (PASDEP).
Accordingly, the Bank’s support - both financial and
analytical - is focused around what it considers are
four main pillars: fostering economic growth;
improving quality of basic services; reducing
vulnerability to food insecurity; and promoting good
governance.
The Bank’s programme for the 2008 fiscal year is
based on an initial International Development
Association (IDA) allocation of about 635 million
dollars.
However, before the Bank implements such support, it
plans to consult with other donors, as well as the
government.
“Only when there is a broad agreement that budget
support is the right instrument with which to aid
Ethiopia, will the Bank consider resuming it,” Mr.
Ohashi told Fortune.
World Bank is an internationally supported Bank that
provides loans to developing countries for
development programmes with the stated goal of
reducing poverty.
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