US$ 163 million Grant to Ethiopia to Finance the Protection of Basic Services Programme

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Tunis, December 18th, 2008 - The Board of Directors of the African Development Bank (AfDB) Group has approved a Unit of Account (UA)* 110 million African Development Fund (ADF) grant, equivalent to US$ 163.6 million, to finance the Protection of Basic Services II (PBS II) programme in Ethiopia.

Services are more crucial than ever in this country before because of its difficult socioeconomic situation and macroeconomic environment, caused by external factors, especially the hike in oil prices and food products. The urgent allocation of resources by the African Development Bank, the World Bank, and other major development partners will be essential in helping Ethiopia manage these problems.

The purpose of the PBS II programme is to help the Government of Ethiopia implement its poverty reduction strategy (the PASDEP). By the end of the three year implementation period, the expected results are: (i) improved social indicators; (ii) robust fiduciary arrangements; and (iii) local governance structures that ensure effective development. The ADF’s PBS II will contribute to financing the delivery of basic services targeting primary health, education, agriculture, and water and sanitation at the local level with the aim of influencing the implementation of Ethiopia’s Decentralization Governance agenda.

The program will contribute to the maintenance of Ethiopia’s macroeconomic stability through its provision of foreign currency. This will assist in reducing the budget’s funding deficit. Other benefits include the enhancement of basic service delivery services, notably disadvantaged groups and communities. The program will also give indirect beneficiaries, like the rural and urban poor, the potential to participate in budget decisions that directly affect them.

The grant will be split into three sections, over three financial periods, from June 2008 to July 2011.

The AfDB started operations in Ethiopia in 1975. To date, its cumulative commitment in the country stands at US$ 2.564 billion for 106 operations. The AfDB’s objective is to reduce poverty by addressing key policy and administrative challenges related to local governance; public financial management; the quality of locally delivered basic services; and inequities in access to the services.

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