Reform financing

completed

Reform financing for growth and competitiveness supports the ambitious Ethiopian reform agenda in a timely, significant and targeted manner. The Ethiopian reform agenda aims at the transition to a more private sector-oriented development model, taking into account social stability, democracy and the rule of law. Reform financing for growth and competitiveness is being implemented as co-financing of the Growth and Competitiveness Program set up by the World Bank together with the Ethiopian government. This is the largest and most important donor program to support reforms and supports Ethiopia with large-volume Development Policy Financing (DPF) in three thematic groups (target areas): 1. Maximise development financing (significant increase in the financing framework for development financing) 2. Improve the investment climate and develop the financial sector 3. Increase transparency and accountability. The German contribution to reform financing focuses in particular on the second thematic group as parallel financing to the other donor contributions. By actively shaping the reform goals and disbursement criteria, the framework conditions for private sector support are to be improved, access barriers for loans in the private sector are to be reduced and the transition to a more private sector-oriented development model is to be supported. In addition to the World Bank and Germany, France also supports the program through the AFD. The result is harmonized financing of three relevant development partners, aligned with the strategies and procedures of the Ethiopian partner government. The donor community's support of the program increases the incentive to achieve the agreed reform steps compared to purely bilateral implementation and the capacities of the Ethiopian government are used optimally. In accordance with the principle of demanding and promoting, the Ethiopian government will be enabled to continue, expand and accelerate its reforms through considerable financial resources if the agreed institutional and structural reform progress is met. By supporting reform financing, a significant contribution is thus made to achieving the goals of Ethiopian reform policy, in particular the improvement of macroeconomic and social stability and the sustainable creation of jobs. However, the political environment has changed fundamentally compared to when the MV was drawn up. Since November 2020, the country has been in a violent conflict over the province of Tigray, which is heading towards an even greater humanitarian crisis, increasingly endangering the cohesion of the federal state and calling into question development policy successes. On November 2, 2021, a state of emergency was declared and civil rights restricted. The international community is making intensive efforts to initiate a peace process. In addition, the COVID-19 pandemic has severely slowed economic and social development.