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August 20, 2008

Ethiopia will divert World Bank loans to buy fertilizer

Ethiopia and the World Bank are close to an agreement that will allow the Horn of Africa country to divert $237 million in loans and grants for infrastructure projects to purchase fertilizer, the bank said. Ethiopia needs the fertilizer before next year's planting season, Kenicha Ohashi, director of the World Bank's Ethiopia program, said in an interview at his office in the capital, Addis Ababa. Ethiopia is Africa's largest coffee producer.

"What we're trying to do is provide foreign exchange,'' said Ohashi said. "his is like doing budget support. It's helping the government with hard currency.''

An additional $64 million in credit from the African Development Bank will be diverted for fertilizer purchases, the state-run Ethiopian Herald said on Aug. 2.

Rising domestic demand, drought, and higher world fuel and food prices expanded Ethiopia's trade deficit to $4.7 billion in the 12 months to July from $3.9 billion a year earlier. The country has less than two months of foreign currency reserves, according to the International Monetary Fund.

The financing of the fertilizer is equivalent to about 10 percent of the World Bank's $2.4 billion Ethiopia program, which includes $1.6 billion in loans and $800 million in grants this year. Most of that money was allocated to road building, irrigation systems and the construction of power transmission lines to connect Ethiopia and Sudan.


Bloomberg

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