World Bank Provides Support to Ethiopia’s Efforts to Boost Food Production-The FINANCIAL

The FINANCIAL -- WASHINGTON, June 23, 2011 - The World Bank Board of Executive Directors today approved an International Development Association (IDA) credit of US$60 million in additional financing to the Government of Ethiopia in support of its efforts to sustainably increase agricultural output and productivity in the Project Area.

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This objective will be achieved by developing 20,000 ha of irrigation and related infrastructure (drainage and access roads), providing support to the Government, and the project beneficiaries for agricultural and market development and for sustainable irrigation management.

Irrigation development is a key priority of the Government of Ethiopia (GoE). In the new Growth and Transformation Plan (2010/11 – 2014/15), the GoE’s five year strategy, “Maintaining agriculture as a major source of economic growth” is stipulated as one of five central pillars to drive growth and development in the country. The plan outlines that “Expansion of small scale irrigation will be given priority while due attention will be given to medium and large scale irrigation to the extent possible”.

Ethiopia’s current emphasis on expanded investment in irrigation has benefited from achievements in recent years under the Nile Basin Initiative (NBI) which was actively supported by the World Bank in the past years. The Eastern Nile Council of Ministers (ENCOM) decided in March 2001 that funding should be sought to advance studies of promising irrigation and drainage sites to feasibility and design level. In October 2004, ENCOM agreed to fast-track the preparation of the Irrigation and Drainage (I&D) project which was then prepared by the GoE. The project was approved by theWorld Bank ’s Board of Executive Directors in June 2007 at the same time as the West Delta irrigation project in Egypt.

The proposed additional financing (AF) would help complete the original project objectives in the context of an unanticipated financing gap. Detailed engineering designs have produced higher cost estimates than the preliminary cost estimates based on the conceptual design used for the purposes of project appraisal. The additional funding will allow the GoE to complete the construction of the two large irrigation schemes initially included in the project to their full extent, namely Megech-Seraba and Ribb schemes. The financing would cover cost increases, a provision for small post-construction improvement works, and a significant increase of the budget allocated to the implementation of the Environmental Management Plan of the two schemes based on the detailed costing provided in the respective Environmental and Social Impact Assessment (ESIA) reports. Despite the significant cost increase, the revised economic analysis shows that the economic rate of return for the project is still significantly higher than the cost of capital.

“This project has the potential and the ambition to transform the agricultural practice in the Project Area from subsistence, low input-low output type of farming to a more entrepreneurial type of farming generating surpluses out of which the smallholder beneficiaries will be able to cover the cost of irrigation service, thus ensuring long term sustainability” said Francois Onimus, the World Bank ’s project task team leader.