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afrol News, 5 June - The World Bank today approved a US$ 150 million Economic Rehabilitation Support Credit (ERSC) to help the government of Ethiopia stabilize the economy and move back to a sustainable path of growth. "Financing from the ERSC would cover the needs of an economy that is suffering from the impact of a border conflict with Eritrea, a drought, and a sharp decline in the terms of trade," the Bank states. Following the signing of the peace agreement on 12 December 2000, the government resumed its economic and social reform efforts through developing an interim Poverty Reduction Strategy Paper (I-PRSP). - The strategy re-affirms the government's main strategic directions for poverty reduction within a framework of macroeconomic stability, emphasis on rural development, improved governance and a strong private sector participation in the economy," according to a World Bank statement. The credit is said to be fully consistent with the Poverty Reduction Strategy, and builds on three areas that will be further developed:
Such activities will help stimulate economic growth to around 7 percent per annum, reduce inflation to low single digits and raise the import reserve cover to about four months. - This will require a comprehensive reform of tax policies and administration; increasing expenditure to key social and infrastructure services and a monetary policy geared at containing inflation, while insuring adequate growth in domestic credit to the private sector, according to the World Bank's analysis. The Economic Rehabilitation Support Credit will be financed by a US$ 150 million credit from the International Development Association, the World Bank's lending arm for the poorest countries. The IDA credit is on standard terms of 40 years maturity, including 10 years grace.
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