Ethiopia Secures $1bn World Bank Support to Boost Economic Reforms and Stabilize Financial Sector

Ethiopia has secured a fresh $1 billion funding package from the World Bank to bolster its wide-ranging economic reform agenda and address mounting financial sector vulnerabilities, the country’s Ministry of Finance disclosed over the weekend.

The agreement, made under the Second Sustainable and Inclusive Growth Development Policy Operation, was signed by Ethiopia’s Finance Minister Ahmed Shide, and Maryam Salim, the World Bank Country Director for Ethiopia, Eritrea, Sudan, and South Sudan. The financing comes in the form of both a grant and a concessional loan, marking a significant injection of international support as the government struggles to navigate post-conflict reconstruction, inflation, and foreign exchange shortages.

According to the ministry, the World Bank’s support will be channeled toward key areas of economic governance and development: stabilizing the financial sector, enhancing trade competitiveness, improving domestic revenue mobilization, and promoting transparency and effective governance. The funding will also help sustain social services delivery as the government works to maintain its fragile recovery.

“These are integral pillars of Ethiopia’s macroeconomic and structural transformation,” the ministry said in a statement. “The financing reflects the Bank’s continued commitment to supporting Ethiopia’s bold and far-reaching reform agenda.”

A Vote of Confidence — But with High Expectations

The fresh support from the World Bank is being interpreted by some observers as a vote of confidence in Prime Minister Abiy Ahmed’s economic team, despite a challenging fiscal environment. Ethiopia, still recovering from a brutal civil conflict in Tigray and facing high inflation, has been working to liberalize parts of its economy, modernize the financial sector, and attract foreign direct investment.

The World Bank’s support is expected to reinforce the government’s push to open up the banking and telecom sectors, overhaul tax administration, and introduce broader fiscal and monetary discipline — reforms that have drawn both praise and concern from citizens and development economists.

Ethiopia is facing significant external financing gaps. The local currency, the birr, has come under pressure from growing import demand and limited export earnings, while the country’s foreign reserves remain critically low. The public debt burden also remains a major concern, especially after the country missed a Eurobond repayment earlier this year, leading to a downgrade in its credit ratings.

The World Bank aims to help Ethiopia expand its tax base and reduce reliance on external borrowing by supporting domestic resource mobilization, a key concern raised by international lenders and credit agencies. The program also targets better oversight of public finances and efforts to restore fiscal credibility through transparency and efficiency.

The Ethiopian Ministry of Finance described the deal as a reaffirmation of the “strong and enduring collaboration” between Ethiopia and the World Bank — one that will be critical in helping the country navigate its macroeconomic pressures, rebuild trust in financial institutions, and lay the groundwork for inclusive growth.

This support comes at a time when the international development community is cautiously optimistic about Ethiopia’s reform efforts but remains watchful of risks. The World Bank itself has stressed the importance of continued implementation and political stability to ensure the reforms lead to measurable improvements in the lives of ordinary Ethiopians.

With this new injection of funds, the government will be expected to show tangible progress in cleaning up the financial sector, reining in fiscal deficits, and improving the effectiveness of public service delivery. But with inflation still hovering in double digits and millions of people facing food insecurity, the road remains fraught with challenges — even with international backing.