Ethiopia

Route aux abords d'Addis Abeba, Éthiopie — © Didier Gentilhomme pour l'AFD

With a population of about 125 million, and a population that continues to grow at a rapid rate (+2.5% per year), Ethiopia is expected to reach 150 million by 2050 and remains the second most populous country in sub-Saharan Africa.

Context

The economy of the country is one of the most dynamic in the region, reaching 6.4% growth in 2022, but it is also one of the poorest countries on the continent, with a gross national income per capita of $ 1,020 and a human development index of 0.498 (ranked 175 out of 189). However, Ethiopia, which remains a LDC for the United Nations and a low-income country for the World Bank, aims to achieve lower-middle-income status by 2025, and is one of the 6 countries having joined the BRICS in January 2024.

Despite considerable progress between 2000 and 2021 (HDI up 73.5%, child mortality halved, improved life expectancy and duration of schooling, significant reduction in poverty per capita), social imbalances remain large and multiple. The level of food insecurity, reflected by a prevalence rate of undernourishment, remains very high in absolute terms (25 to 30 million people). It is of particular concern in the post-conflict areas. The COVID crisis, then the conflict in the Tigray region from 2020 to 2022, led to significant regressions, particularly in terms of schooling.

Frequent episodes of severe droughts and floods, as well as recurrent outbreaks of desert locusts, also lead to worsening food insecurity in some regions. Ethiopia is indeed very vulnerable to climate change (161th/182 according to the resilience indicator ND-GAIN) and the complex topography of the country leads to a great diversity of climatic conditions. The country has recently strengthened its climate ambitions, notably with the publication of its NDC 2022, as the projections predict both an increase in the frequency and intensity of drought events, but also an increase in rainfall and flooding.

AFD has been present in Ethiopia since 1993 and is therefore positioned as a historic partner, within the framework of a 126-year bilateral relationship between France and Ethiopia. Projects and support provided in grants and loans are aligned with the priorities of the Ethiopian Government, and are subject to close consultation with the Ministry of Finance and Economic Cooperation and sectoral government ministries or agencies, and with civil society organizations and the private sector. The activity of the subsidiaries of the AFD group, PROPARCO and Expertise France, is developing in Ethiopia and is intended to grow in the coming years.

It will continue to adopt a pragmatic approach of positioning on sectors where it can bring added value, in a logic partnership according to the sectors with multilateral donors or in Team Europe, in order to increase the efficiency of its action. This action of the AFD group is fully integrated with that of the France team, with close consultation on strategic axes and a search for complementarity in initiatives.

AFD has been supporting Ethiopiain the fields of energy, water andurban development for many years, and has recently diversified its action in the field of support to macroeconomic reforms and to some economic sectors such as heritage and tourism. It also has included means to support return to peace and resilience in this post-conflict context, prerquisites for a return to a sustainable development path.

Our approach

"AFD and Ethiopia: boosting economic dynamis"

The Ethiopian electricity system faces many challenges: massive electrification program, integration of renewable energies, development of new electrical uses and digitalization.

But the country’s objectives go well beyond its domestic needs: in the long term, it aims to increase its export of electricity to supply neighboring countries.

AFD is assisting Ethiopian Electric Power (EEP), the national power generation and transmission operator, in extending, modernizing and strengthening the national power grid, with the support of the French operator Réseau de Transport d'Electricité (RTE). We have financed the construction of transformer stations and the installation of transmission lines around Addis Ababa. A new control center is also being built for the national power grid, that will improve distribution, reduce losses and guarantee a stable electricity supply for inhabitants, as well as a new training center AFD is aiming at increasing this support to the energy sector in close partnership with the European Union and the European Investment Bank (EIB).

Ethiopia has the second largest hydropower potential in Africa, with over 50 GW, and has been investing heavily in power generation since the 2000s.

The Government has set out to reduce drought-related risks by diversifying renewable energy generation sources. In this context, AFD has cofinanced the country’s first wind farm, in the north, near Mekele.

AFD could support projects to rehabilitate hydroelectric dams or other renewable energy development projects in the medium term.

With one of the least urbanized populations in the world, Ethiopia is facing a real urban revolution, the main part of which remains to come and requires anticipating a massive and rapid urbanization rate, aggravated by recent conflicts, which increases the population pressure in the capital and in secondary cities. AFD together with the World Bank is supporting the Government’s commitment to ensuring that urban development is sustainable and harmonious. Increasing access to essential urban services, promote urban planning that integrates nature-based solutions and support the strengthening of intermediary cities to make them regional development poles and balance the country’s urban network will remain an important priority of AFD in Ethiopia.

Our strong partnership with Addis Ababa municipality is the spearhead for our action in this field and is based on urbanmobility. We are financing the first bus rapid transit (BRT) line in the capital. These rapid, regular and priority buses run on dedicated traffic lanes which will be accessible to people with reduced mobility.

Access to drinking water and sanitation in cities is another priority for AFD. After increasing the capacity of the drinking water production plant in Addis Ababa, since 2011, we have been helping the Water Resources Development Fund (WRDF) and the Water Development Commission to improve water and sanitation services in the country’s secondary cities.

In terms of support for macroeconomic reforms, AFD’s policy loan in 2019, accompanied by a strong grant-financed technical assistance component, has enabled France to become an important partner in supporting the reform agenda (Homegrown economic reform) of the government : reform of the governance of SoEs, consolidation and operationalization of public-private partnerships, support for the structuring of the capital markets authority, proved to be very positive with French experience and good peer to peer partnerships.

As the reform agenda is back on track with a new Homegrown economic reform programme, AFD is available, in coordination with other multilateral and bilateral partners of Ethiopia, to continue and intensify this new support to reforms that are crucial for the stability and competitiveness of the country in the coming years.

Supporting the development of certain job-creating economic sectors such as heritage and tourism, with a vocational training dimension

A recent AFD intervention in Ethiopia that is gaining momentum and visibility is heritage renovation, in line with the country’s tourist attractiveness and local economic development. With Expertise France, it is implementing the emblematic restoration and conservation operations of the National Palace and the churches of Lalibela. The expertise and French know-how wished by the Ethiopian authorities are mobilized on these two operations allowing a transmission of knowledge-make and conditions of unique vocational training in the areas of heritage conservation and management, cultural mediation, etc.

AFD has also included in its country strategy the needs that arise from the recent conflict in Tigray. Supporting national reconciliation and transitional justice, strengthening the sector of civil society organizations and human rights institutions, are indeed crucial prerequisites if the country is to return to a sustainable development path.

Through food security and resilience projects AFD is also paying particular attention to areas affected by the consequences of conflict and climate change.