WASHINGTON, July 3, 2025 - The World Bank's Board of Executive Directors today approved a $1 billion Development Policy Operation (DPO) to support Ethiopia's transition toward a more inclusive and private sector-led growth model. The Second Sustainable and Inclusive Growth DPO builds on an earlier operation approved in July 2024, providing additional financial support for the Government of Ethiopia's homegrown Economic Reform Agenda. The financing includes a $650 million grant and a $350 million concessional credit from the International Development Association (IDA)*.
In July 2024, the Government of Ethiopia launched comprehensive reforms to reduce large macroeconomic imbalances that had accumulated in recent years. Supported by this programmatic DPO series, the reform agenda has already delivered early gains, including a narrowing of exchange rate distortions, improved domestic revenue mobilization, stronger export performance, and moderation of inflation.
This second operation deepens and broadens these efforts by supporting better financial intermediation, fewer barriers to trade and investment, higher revenue collections, and more transparent public finances. The operation also expands support for poor and vulnerable groups through reforms to expand income opportunities in rural areas, further improve social protection, and improve the quality of human capital.
"Building on the progress of the first operation, this DPO reinforces Ethiopia's efforts to accelerate the shift toward a more inclusive, sustainable, economy that allows the private sector to contribute more strongly to growth," said Maryam Salim, World Bank Division Director for Eritrea, Ethiopia, South Sudan, and Sudan. "It also maintains a strong focus on protecting the poor from the short-term costs of economic reforms and expanding their opportunities to participate in the economy."
This operation is part of the World Bank Group's broader engagement in Ethiopia, which spans health, education, social protection, energy, finance, digital development, agriculture, land, transport and trade logistics, water and sanitation, and urban development. The World Bank Group is one of Ethiopia's largest sources of development finance, providing over $2 billion in highly concessional financing-a significant share of which is in grants-annually through the International Development Association (IDA). IDA's current portfolio totals $15.5 billion, with $6 billion still available for disbursement. The International Finance Corporation (IFC) has an active investment portfolio of $320 million, and the Multilateral Investment Guarantee Agency (MIGA) has issued $1.15 billion in guarantees.
Looking ahead, the World Bank remains committed to supporting Ethiopia's ambition to achieve middle-income status. Subject to Board approval and resource availability, IDA expects to provide approximately $5 billion in new commitments over the next three fiscal years, including support for economic reforms through fast-disbursing budget operations.
* IDA was established in 1960 and helps low-income countries by providing grants and low to zero-interest loans for projects and programs that boost economic growth, reduce poverty, and improve people's lives. IDA is one of the largest sources of assistance for its 78 client countries, 39 of which are in Africa. Since 1960, IDA has provided $563 billion to 116 countries. Annual commitments have averaged about $34.5 billion over the last three years (FY22-FY24), with about 71% going to Africa. Learn more online: IDA.worldbank.org. #IDAworks
