WASHINGTON, December 19, 2024 – Ethiopia’s financial system is set to receive a transformative boost following the World Bank’s approval of a $700 million credit for the Financial Sector Strengthening Project (FSSP). This ambitious initiative, funded through the International Development Association (IDA), aims to fortify the stability and resilience of Ethiopia’s financial sector, laying the groundwork for sustainable economic growth.
Ethiopia’s financial system currently faces significant hurdles, including outdated regulatory frameworks and struggling public financial institutions. The FSSP is designed to address these challenges by modernizing the regulatory and supervisory framework of the National Bank of Ethiopia (NBE), overhauling governance structures, and restructuring the balance sheets of key institutions like the Commercial Bank of Ethiopia (CBE) and the Development Bank of Ethiopia (DBE).
The project will also support the transformation of the DBE into a sustainable development finance institution, ensuring its long-term viability in driving Ethiopia’s economic development. A critical component of the initiative is the capacity-building and implementation support for the NBE, CBE, and DBE, aimed at fostering resilience and improving financial accessibility for Ethiopians across the board.
A Pathway to Stability and Growth
Maryam Salim, World Bank Country Director for Eritrea, Ethiopia, South Sudan, and Sudan, emphasized the project’s transformative potential.
“We are proud to support Ethiopia in its journey to transform and strengthen its financial sector. This project reflects our commitment to promoting economic stability and inclusive growth in the country. By boosting the capacity of key financial institutions, we aim to build a more resilient and accessible financial system that truly meets the needs of all Ethiopians,” Salim said.
The approval of the FSSP marks a pivotal moment in Ethiopia’s efforts to build a financial system that supports economic diversity and inclusivity. Beyond resolving current challenges, the initiative aims to unlock new growth opportunities by fostering a robust financial ecosystem capable of adapting to future demands.
The Role of IDA in Ethiopia’s Development
The International Development Association (IDA), the financing arm behind the FSSP, has a long-standing history of supporting low-income countries with grants and low-interest loans. Established in 1960, IDA has provided over $552 billion to 115 countries, with a significant portion directed to Africa. Ethiopia’s FSSP is the latest example of IDA’s commitment to driving economic transformation and poverty reduction.
As Ethiopia embarks on this critical phase of financial reform, the infusion of $700 million is expected to catalyze meaningful change, equipping its financial institutions to better serve the country’s 120 million citizens and enabling a more stable, inclusive, and prosperous future.
For more information on the Financial Sector Strengthening Project and IDA’s work in Ethiopia, visit IDA.worldbank.org.
