Wednesday, 9 December 2015

Financing For Development – Final Project for MOOC Course

Leveraging Official Development Assistance, ODA, as a Private Sector Growth Catalyst in Ethiopia

Current Role of development finance in Ethiopia 

ODA played a significant role to the coutry's development objectives directly employed for
  • Humanitarian aid,
  • Health and Population,
  • Economic infrastructure and services,
  • programs assistance,
  • education,
  • multisector or cross cutting issues,
  • other social sectors,
As the data from for Ethiopia shows the net ODA disbursement to Ethiopia has been steadily increasing until it peaks to around USD 4,000,000,000.00 in 2009 and started declining since then.

The Need To Shift The Trend:

Given the fact that
  • Net ODA flow to the country as a percentage of GDP is declining,
  • The development finance required is tremendous as compared to ODA flow,
  • The country's GDP is growing and transitioning, hopefully, to middle income category by 2025 , where private sector takes more role as depicted by the client income spectrum,
mobilizing domestic resources particularly the underutilized private sector resources for development objectives is a timely call to action.

However, according to the World Bank's Ethiopian Great Run, Growth Acceleration and How to Pace It Report, the public investment rate in Ethiopia has soared since the early 2000s, while the private sector investment gradually declined.

So, for Ethiopia to sustain the decade old economic growth, it needs to develop proper mix of public, private, and other development finances. One way to do that is to refocus the ODA finance available towards private sector growth. ODA could be applied to build capacity to mobilize other resources or as risk mitigating means so that the private sector  makes investment decision with ease.

That way, Ethiopia's aspiration of becoming a middle income country by 2025 would be met.

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