The Board of Directors of the African Development Fund has approved a $4.3 million grant to fund capacity building within Ethiopia’s finance ministry and related government departments, to enable the country tackle declining growth and other economic challenges. The Ministry of Finance will implement the project.

The African Development Fund is the concessional lending arm of the African Development Bank Group. The Board’s approval came on Friday, 15 July.

The project will support capacity strengthening of the Government of Ethiopia in research and policy analysis, underpinned by a well-managed public investment program. It will support Ethiopia’s goal of developing a cadre of government staff with stronger capacity in research as well as policy analysis and formulation to facilitate the implementation of the country’s Ten-Year Development Plan and Homegrown Economic Reform Agenda. The project will support capacity strengthening of officials in the Ministry of Finance, the National Bank of Ethiopia, Ministry of Development Planning and the recently established Capital Markets Authority.

The project builds on the recently completed Bank Group operation, the Institutional Support Project for Public-Private Partnerships and advisory work to support the establishment of the capital markets authority. The Bank’s added value in supporting the project derives from a number of factors, including its experience in the country, which generated lessons that were incorporated in the project design.

Ethiopia has recorded robust economic growth over the last decade. However, this expansion is under risk due to emerging macroeconomic challenges. Gross domestic product grew at an average of 7.8% annually between 2016-2021, compared to the average of 10.2% annually recorded between 2011 and 2015. The Covid-19 pandemic, conflict and a desert locust invasion further slowed growth from 8.2% in 2019/20 to 6.3% in 2020/21. In addition, the Russia-Ukraine war and associated sanctions have had adverse impacts, resulting in higher prices for fuel, wheat, and cooking oil.