News: Ethiopia moves closer to securing $300 million WB loan for rural connectivity project

Addis Abeba – The government has initiated a study document to secure a $300 million loan from the World Bank for its upcoming project, “Rural Connectivity for Food Security. The study’s commencement ceremony took place on August 28, 2023, at the Skylight Hotel.

Bezawit Tesfaye, a representative of the World Bank, announced during the ceremony that the study is expected to be finished by March 2024, with implementation set to begin in April 2024.

In 2021, the government requested a loan from the World Bank after submitting a concept document in October of the same year. The World Bank has confirmed that the project appraisal has reached its final stage.

The primary objective of the project is to construct 108,797 kilometers of rural roads, connecting 5921 kebeles that currently lack all-season roads. The World Bank is expected to cover approximately 40% of the 10-year project cost. The total program is estimated to cost $774 million.

With a population of over 120 million, about 80% of Ethiopians reside in rural areas with insufficient road infrastructure. Moreover, 66% of the country’s labor force is engaged in agriculture, where productivity remains low. The government has emphasized that improving connectivity to markets is of utmost developmental importance since Ethiopia is a landlocked country with a significant rural population.

For the past two decades, Ethiopia’s growth strategy has primarily relied on substantial public infrastructure investments. Until 2020, the country allocated 4% of its gross domestic product (GDP) each year to road construction.

The World Bank has been a major financier of the five phases of the Road Sector Development Program (RSDP), which began in 1997. Under the RSDP, the country’s road network expanded from 26,500 kilometers to 144,027 kilometers in 2020. The total cost of the five phases of RSDP is estimated at 414.7 billion birr.

Despite significant improvements in road connectivity, farmers in Ethiopia still face challenges in accessing markets effectively. Approximately 57% of rural poor individuals live more than three kilometers away from an all-weather road.

During the ceremony, Yetimgeta Asrat, Deputy Director General of the Ethiopian Roads Administration, highlighted that the experience gained from the Universal Rural Road Access Program (URRAP) will be utilized to achieve the objectives of the Rural Connectivity for Food Security Project. Since 2010, the government has constructed 79,806 kilometers of rural roads under URRAP, costing $1 billion.

Wondimu Seta, the State Minister for Urban and Infrastructure Development, emphasized that the successful implementation of the project requires the full participation of both federal and regional authorities. Thirteen public institutions, including the Ministry of Transport and Logistics, the Ministry of Urban Development and Infrastructure, the Ethiopian Roads Administration, and regional bureaus responsible for road construction and maintenance, are expected to be involved in the project.

In 2021, the government launched the 10-year Transport Sector Perspective Plan with the aim of expanding the network coverage to 245,942 km. However, implementing this plan will require 3.04 trillion birr in funding. Unfortunately, in recent years, the government has faced a shortage of funds to finance road projects.

In June 2023, Finance Minister Ahmed Shide presented the budget proposal for the 2016 Ethiopian fiscal year to members of parliament (MPs). During his presentation, he emphasized that the nation is currently experiencing a serious fiscal imbalance. This imbalance is a result of various factors, including declining tax revenue, a decrease in external loans, and increased public spending due to events such as the militarized conflict and the unprecedented drought sequence.

“Due to this fiscal imbalance, the government has had to halt the launch of new road projects,” Ahmed told MPs. “Instead, our focus will be on completing the projects that have already been started within the designated timeframe.” AS