World Bank Grant to Ethiopia to Fund Second Stage of the PSNP

Sources: Ethiopia, World Bank Sign Grant Accord
this document prepared by the World Bank.)

During a ceremony held on January 11, 2007, at the Ministry of Finance and Economic Development, Ethiopian government officials and World Bank representatives signed a grant agreement giving $175 million to the developing country. The funds from this grant will be used to finance the second phase of the Productive Safety-Net Programme (PSNP), a program to fight poverty and food insecurity in the African nation. (For more information about the PSNP, see this document prepared by the World Bank.)

The first phase of the PSNP, implemented in 2005, was financed by the World Bank and other development partners, including the European Union, the United Kingdom, and Ireland, for over $295 million. In order fulfill the total financial requirement of this second phase (reportedly, this phase will require about $915 million), the same development partners are expected to co-finance the endeavor, as well as Canada, the United States, Sweden, and the World Food Programme.

According to Ishac Diwan, World Bank Country Director for Ethiopia and the Sudan, the next phase of the PSNP will focus on “improving the quality of the work and the quality of good governance which [will] remain more fair and clear of any political risk.”

Question: What steps should Ethiopia take first in order to use the World Bank funds effectively, while remaining focused on its goal of improving the quality of work and governance throughout the country?