Highlights

The World Bank Group’s engagement took place within a challenging environment marked by differing diagnoses between the Bank Group and the government on economic and private sector reforms during the period of increasing macroeconomic imbalances, followed by a brief period of reform, which was interrupted by worsening economic crisis and conflict.

The Bank Group strategies were relevant to the country’s development objectives, but the engagement’s effectiveness was modest. The Bank Group’s country engagement evolved with changing government priorities and in a difficult context but did not adapt as well to sudden changes in the security situation, in which gaps in monitoring and evaluation weakened project oversight and impact.

The Bank Group’s analytic work took a pragmatic, collaborative approach with the government that focused on areas of mutual agreement but was less effective in engaging in, and in some cases did not always openly urge for, transformative reforms in contentious areas, such as the macroeconomic reforms. The Bank Group also reduced its public profile as a knowledge broker during the conflict and economic crisis to preserve relationships.

The Bank Group played a leading role in technical and sector working groups, successfully attracting cofinancing from development partners. Since the Tigray conflict began in 2020, it became more difficult for the World Bank to convene partners as their conflict-related strategies diverged. Consequently, its strategic leadership role at the program level in the development community was limited over the conflict and crisis period.

The World Bank portfolio doubled over the evaluation period, with limited adjustments to emerging issues such as conflict and worsening macroeconomic imbalances and debt, which increased risks to the portfolio and reduced effectiveness. The shift to faster-disbursing modalities and a high proportion of additional financing provided resources for poverty alleviation during crises, but it limited the World Bank’s opportunities for course corrections. Attempts to use third-party implementation and monitoring in conflict areas only partially materialized.

The purpose of this chapter is to describe the evolution of the Bank Group’s engagement in Ethiopia from FY13 to FY23. It covers the Bank Group’s FY13–16 Country Partnership Strategy (CPS) and the FY18–22 CPF. It looks specifically at the evolution of the Bank Group’s strategy, portfolio, analytic work, and convening role before assessing the effectiveness of these efforts across three distinct periods. The first period, from FY13 to FY18, witnessed high economic growth and increasing macroeconomic imbalances, while political unrest gradually increased. The second period, from FY19 to FY20, was characterized by increased government-led openness to economic reforms. This openness was interrupted by a third period of conflict and economic crisis, from FY21 to FY23.

This chapter finds that the Bank Group’s country engagement showed pragmatism and resilience in a changing country context. These difficulties included competing diagnoses between the Bank Group and the government during the early evaluation period when macroeconomic imbalances increased. This period was followed by a short period of reform, which was then interrupted by the COVID-19 pandemic, an outbreak of conflict, and a worsening economic situation, including price shocks due to Russia’s invasion of Ukraine. The Bank Group adopted a pragmatic approach to these challenges by collaborating with the government on mutually agreeable areas while avoiding potentially contentious issues for which consensus could not be reached related to the government’s economic policies or the Tigray conflict. This collaborative approach helped the Bank Group maintain its working relationship with the government, which allowed it to rapidly respond to reform openings and to continue its support for economic growth and poverty alleviation during a crisis period. Yet, this approach led to the Bank Group not urging for more transformative changes, including critical macroeconomic and private sector reforms. The Bank Group did not formally adjust its strategy in response to the escalating conflict in the Tigray region in 2020 but changed its project implementation modalities to include more TPI and monitoring. However, these efforts were often ineffective because of disagreements with the government.

Evolution of the World Bank Group’s Strategy

The World Bank’s two strategies evolved to remain relevant to the government’s objectives, as articulated in their GTPs. GTP I covered the 2009–10 to 2014–15 period, whereas GTP II covered the 2015–16 to 2019–20 period. The goals for both plans were for Ethiopia to graduate from low-income to middle-income country status, by 2023 in GTP I and by 2025 in GTP II. The subsequent 10-year development plan extended this target date to 2030 (Ethiopia 2021). GTP I laid out the government’s development model, in which the state would drive the country’s economic growth through large public investments, particularly in infrastructure. Both plans envisioned the agriculture sector being the main source of economic growth while also emphasizing industry to create jobs and improve export competitiveness, as well as infrastructure, good governance, and social services. The CPS and CPF supported the GTPs by focusing on employment, climate resilience, agricultural productivity, good governance, and export competitiveness.

The Bank Group’s strategies were coherent and informed by core diagnostics. Most of the country’s development constraints identified in the CPF were continuations of those identified in the CPS. The CPF’s priority areas were more relevant to Ethiopia’s macroeconomic situation (figure 2.1). For example, the CPS broadly aimed to help build a stable macroeconomic environment in Ethiopia, but the CPF was more specific by aiming to make infrastructure financing and debt management more sustainable, which emerged as larger issues as Ethiopia’s risk of debt distress worsened. As such, the CPF also described the country’s revenue mobilization and exchange rate challenges (see chapter 3). Appendix A maps out the progression from the CPS to the CPF, which was informed by the World Bank’s 2016 Systematic Country Diagnostic.

World Bank strategies highlighted growing conflict risks and prepared conflict analyses before the Tigray conflict. The CPS recognized that the government’s transition in 2012 and the 2015 elections could lead to instability. It also highlighted security risks from cross-border tensions and spillovers from conflict-affected neighbors in the Horn of Africa, leading the World Bank to install a fragility, conflict, and violence focal point in the Addis Ababa office in 2018. Similarly, the CPF discussed the escalating social unrest and incorporated a novel approach to support greater social and economic inclusion through the CPF’s spatial lens. In 2019, the World Bank analyzed Ethiopia’s fragility and political economy and started work to integrate conflict sensitivity into projects before the Tigray conflict broke out.

Figure 2.1. Major Events in Ethiopia and International Development Association New and Total Commitments for Ethiopia by Fiscal Year

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Figure 2.1. Major Events in Ethiopia and International Development Association New and Total Commitments for Ethiopia by Fiscal Year

Source: Independent Evaluation Group.

Note: CPF = Country Partnership Framework; CPS = Country Partnership Strategy; DPF = development policy financing; FCS = fragile and conflict-affected situations; IPF = investment project financing; PforR = Program-for-Results.

The Bank Group did not formally modify its strategy after the Tigray conflict began but did seek to adjust its operational approaches. World Bank staff prepared a draft Performance and Learning Review of the CPF in 2022, but World Bank management did not seek to formally modify the CPF because of high uncertainty from the ongoing conflict and concerns from shareholders about potential signaling effects of a programming document, even though the Board continued approving projects, especially Program-for-Results (PforR) projects, and a surge in additional financing during this time (see the Evolution of the World Bank Group’s Portfolio section later in this chapter). Instead, in FY22, the Bank Group adjusted its operational approach to a more people-centered approach in conflict-affected areas to better navigate the risks associated with the conflict. This approach halted new infrastructure and policy lending but continued approving projects that directly benefited people, such as basic service delivery and climate resilience operations. This adjusted approach also included attempts to apply TPI and monitoring to mitigate the risks to the International Development Association (IDA) portfolio amid ongoing conflict (as stated in an internal board document).

Country strategies were not active for two years of the evaluation period—FY17 and FY23. A CPS progress report was prepared in October 2014 and did not extend the CPS period beyond FY16. The FY18–22 CPF was then prepared during FY17 and presented to the Board in May 2017. The CPF expired in FY22, and no Performance and Learning Review was formally approved to adjust the strategy and its results framework or to extend the strategy (see discussion in the previous paragraph). Preparations for the new CPF began in FY24 after the end of the Tigray conflict.

Evolution of the World Bank Group’s Analytic Work

The Bank Group took a collaborative approach with the government on analytic work over the evaluation period. Starting in the period of increasing macroeconomic imbalances, the World Bank reengaged the government on macroeconomic analytic work while publicly avoiding potentially contentious topics. It continued this approach throughout the evaluation period, allowing the Bank Group to maintain a strong relationship with the government and build up a knowledge base, which then facilitated the quick preparation of a development policy operation (DPO) series when the period of reform opening occurred. During the period of conflict and economic crisis, the World Bank reduced its profile while maintaining a close, if less public, dialogue with the government. This approach facilitated reengagement to support recent reforms in the context of the July 2024 International Monetary Fund (IMF) program and Bank Group DPO. The International Finance Corporation (IFC) engaged in advisory services throughout the evaluation period, peaking during the period of reform.

Published analytic work over the evaluation period avoided potentially contentious topics. For example, the 2015 Country Economic Memorandum and Economic Updates for Ethiopia from 2012 to 2021 did not directly advocate for a change in some economic policy choices that it considered inconsistent with macroeconomic stability and healthy private sector growth.1 Unpublished analytic work supported the government’s analysis of the exchange rate policy in both the earlier and later parts of the evaluation period. Unpublished analytic work also supported domestic resource mobilization. Some advisory services and analytics (ASA) focused on how to support government priorities, such as building business parks and improving the SOE system, rather than full-scale private sector reforms that could create a level playing field for businesses. Interviews point out that criticism of economic policies had strained the relationship with the government before the start of the evaluation period. While some interviewees noted that the World Bank could have been more proactive in raising policy disagreements with the government, others supported the World Bank’s approach and considered that a more direct or confrontational approach would not have been effective in influencing government policies. For example, the World Bank had limited leverage to affect government borrowing policies. When the World Bank responded to the government’s nonconcessional borrowing by converting the grant portion of Ethiopia’s performance-based allocation from grants to credits, the government did not change its nonadherence to the World Bank’s borrowing ceilings.

The World Bank lowered the visibility of its ASA as the conflict and macroeconomic crisis unfolded so that it would not jeopardize relationships.2 The World Bank has limited its production of publicly available macroeconomic ASA since 2022 but continued less controversial ASA, such as the 2024 Country Climate and Development Report. In interviews, some stakeholders, including academics and think tank officials, stated that the World Bank had reduced its role as a knowledge institution.

Despite these challenges, the Bank Group carried out many relevant ASA (figure 2.2). The Governance Global Practice accounted for the largest share of World Bank ASA, or 24 out of 171 World Bank ASA, including Public Expenditure and Financial Accountability assessment reports for regional and federal governments on procurement, civil service reforms, and tax administration. The Finance, Competitiveness, and Innovation Global Practice accounted for the second-largest share, with 17 ASA covering a wide range of topics, from financial inclusion and financial sector development to SOE reforms, insurance access, and bond market development. IFC pursued relevant and extensive advisory programs to support the private sector—for example, on improving trade conditions, expanding access to finance, implementing industrial parks, and addressing other priorities (see chapter 3).

Figure 2.2. Advisory Services and Analytics by Global Practice, FY13–23

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Figure 2.2. Advisory Services and Analytics by Global Practice, FY13–23

 

Source: Independent Evaluation Group.

Note: Information on “other” is not available. AGR = Agriculture and Food; ASA = advisory services and analytics; DIG = Digital Development; EDU = Education; EEX = Energy and Extractives; ENB = Environment, Natural Resources, and Blue Economy; FCI = Finance, Competitiveness, and Innovation; FCV = fragility, conflict, and violence unit; GOV = Governance; HNP = Health, Nutrition, and Population; ITR = Transport; MTI = Macroeconomics, Trade, and Investment; POV = Poverty and Equity; SPJ = Social Protection and Jobs; SSI = Social Sustainability and Inclusion; URL = Urban, Disaster Risk Management, Resilience, and Land; WAT = Water.

IFC implemented a large portfolio of advisory services projects. It approved 83 projects for a total funding volume of $151 million. Of these, 26 projects increased access to financial services (see chapter 3), and 11 targeted the agribusiness sector (see chapter 4). Half of the 16 projects with validated evaluations during the evaluation period were rated mostly successful or better.

Evolution of the World Bank Group’s Convening Role

The World Bank has played a leading role in technical and sector working groups over the evaluation period, securing development partner financing for numerous projects across sectors. During the reform period, the World Bank quickly engaged with the government to develop a reform program at a time when there was not yet an IMF program and secured cofinancing for the DPO. During the conflict and economic crisis period, the World Bank faced a challenging environment to convene development partners, with partners shifting their development financing in divergent directions.

The World Bank is Ethiopia’s biggest development partner, and its importance increased over the evaluation period in line with its lending growth. According to Organisation for Economic Co-operation and Development data, during the evaluation period the United States was Ethiopia’s second-largest development partner, followed by the United Kingdom, which reduced its role in the second part of the evaluation period (figure 2.3). The World Bank was the lead development partner in all but three sectors (figure 2.4). In health and population, the World Bank is the lead development partner in basic and general health but not for reproductive health. US agencies provided the largest contributions to emergency response and food assistance during the evaluation period, complementing the World Bank’s extensive support for social protection (see chapter 4).

The Bank Group has been a leading convener in technical and sector working groups over the evaluation period, but its strategic and program-level leadership role diminished in the conflict and economic crisis period. The Bank Group has leveraged its comparative advantage as a convening agent to successfully attract cofinancing for several sectors. For example, the Bank Group secured development partner financing for Ethiopia’s rural and urban safety net programs; the Productive Safety Net Program (PSNP; discussed in detail in chapter 4); and projects in health, water sanitation and hygiene, agricultural productivity, and basic education. It also hosts the PSNP’s coordination secretariat. The World Bank has been a rotating chair of the Development Partners Group, which aims to align partners’ development and aid efforts in the country. Interviews indicate that development partners appreciated the Bank Group’s convening role, although some would have welcomed stronger strategic leadership on critical program-level issues. However, given the context of the COVID-19 pandemic and the Tigray conflict when staff were evacuated from the country and partners applied divergent approaches, the conditions for more strategic development coordination were absent.

Figure 2.3. Share of Disbursed Overseas Development Assistance by Development Partner, by Strategy Period

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Figure 2.3. Share of Disbursed Overseas Development Assistance by Development Partner, by Strategy Period

 

Source: Independent Evaluation Group, based on the Organisation for Economic Co-operation and Development’s Development Assistance Committee database.

Note: EU = European Union.

Figure 2.4. Overseas Development Assistance to Ethiopia by Sector and Development Partner, 2013–22

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Figure 2.4. Overseas Development Assistance to Ethiopia by Sector and Development Partner, 2013–22

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Source: Independent Evaluation Group, based on the Organisation for Economic Co-operation and Development’s Development Assistance Committee database.

Note: EU = European Union; ICT = information and communication technology; IDA = International Development Association.

The World Bank assumed a strong leadership role among development partners when there was a reform opening in 2018–20. The World Bank quickly engaged with the government on its reform program to develop a DPO, playing a key role on macro policy dialogue during a time when an IMF program was not yet in place. In doing so, the World Bank also secured cofinancing from France and Germany for the first Growth and Competitiveness DPO.

The development partner landscape became more fragmented during the conflict and economic crisis period of 2020–23, making it harder to convene partners around development issues. As the conflict intensified, many development partners shifted their financial support strategies in divergent directions. For example, the United States, Ethiopia’s largest bilateral development partner, ramped up its emergency response and food aid—from 56 percent of its 2020 assistance to 84 percent of its 2021 and 2022 assistance (US Department of State 2024). Development partner fragmentation has continued into the period after the Tigray conflict. The World Bank carried out a damage assessment for the Tigray conflict, which underlines the need for reconstruction. However, to date, there has been limited funding from the international community for Tigrayan reconstruction. The Bank Group was unable to play a larger role in convening partners on reconstruction efforts in Tigray since the end of the conflict.

Evolution of the World Bank Group’s Portfolio

The Bank Group adapted to the changing circumstances over the evaluation period, helping avoid a worse economic crisis and higher poverty levels. It increased the use of PforR to promote policy reforms in the early evaluation period before DPOs were viable. During the period of reform, the World Bank quickly prepared a DPO series to advance critical policy reforms. The World Bank responded to various crises during the later evaluation period—for example, COVID-19, locust upsurge, drought, and conflict—and maintained its engagement and financing over the conflict and economic crisis period, including increasing financing through additional financing, thereby helping avoid a worse economic crisis and higher poverty levels. IFC sought to remain engaged with investments throughout the evaluation period, adjusting its strategic approach and committing the largest number of projects in 2019 as reforms took hold. After the reforms, IFC and the Multilateral Investment Guarantee Agency (MIGA) worked together to support the entrance of a second telecommunications provider.

The Bank Group’s financing to Ethiopia almost doubled during the evaluation period. Between FY13 and FY17, IDA committed $7.2 billion in funding. This commitment rose to $13.2 billion between FY18 and FY23, totaling $20.3 billion over the evaluation period (figure 2.1). The IDA portfolio included 31 active projects at the start of the evaluation period, valued at $4.6 billion, and another 92 projects were approved during the evaluation period. Country staff often accessed IDA Windows, including the Crisis Response Window, Window for Host Communities and Refugees, and Regional Window, in addition to the performance-based allocation system.

The portfolio shifted from an emphasis on investment project financing to fast-disbursing PforR, even when validating PforR performance became more difficult in the conflict and economic crisis period. Early in the evaluation period, PforR totaling $4 billion (figure 2.1) provided opportunities to promote policy reforms, especially when development policy lending was limited before 2018. Part of the increase in PforR in Ethiopia is attributed to a strategic decision in the CPS to use PforR instruments more frequently to achieve basic service delivery goals, scale up successful programmatic approaches, and reinforce government systems. By the end of the CPE period, Ethiopia was the third-largest user of PforR by financing volume among all World Bank country programs. However, the World Bank continued to use PforR in Ethiopia, even when validating PforR performance became more difficult in a context of weakening institutions (see box 1.1) and after the government reduced the independence of the Ethiopian Statistical Service in 2021, according to staff interviews and Proclamation Number 1263/2021 (Ethiopia 2022).

PforR approved during the period of economic crisis assessed fiscal sustainability at the sector level but did not fully mitigate against large and increasing foreign exchange parallel market premiums. The June 2019 World Bank directive elaborated on the requirement to analyze the implications of the fiscal context on a PforR program (World Bank 2024b).3 The World Bank has approved five PforR operations since the directive was issued: three in the form of additional financing and two hybrid PforR operations to allow for TPI in conflict-affected areas. Three PforR projects were approved in FY23, when foreign exchange shortages increased already high parallel market premiums from 50 percent to 95 percent. These PforR projects assessed fiscal sustainability at the sector level, including the share of World Bank and other partner financing, and sector-level debt issues.4 They also considered the implications of the large and sustained foreign exchange rate premiums for the projects and included measures to partially mitigate them.5 As noted in a separate World Bank policy research working paper, “a useful counterfactual would be to ask what impact a move to market interest rates and exchange rates would have on debt levels and dynamics” (Gill and Pinto 2023, 21) and, in this case, the fiscal sustainability of the program. It is notable that the government significantly increased its contribution to the program only after the macroeconomic imbalances started being addressed.

During the reform period, the Bank Group restarted development policy lending to rapidly support critical policy reforms. It approved the $1.2 billion Ethiopia Growth and Competitiveness development policy financing (DPF) in 2018, shortly after the government announced its new reform program. This project was designed to be the first in a series of three large budget support operations after a 13-year hiatus in development policy lending. The second DPF ($500 million) was approved in March 2020, followed by $250 million in supplemental financing in June 2020 to support the country’s COVID-19 response. The conflict in Tigray led the World Bank to cancel the third DPF in the series, and IEG and the World Bank rated the series outcome as moderately unsatisfactory.

The World Bank responded quickly to numerous shocks, particularly in the reform and conflict and economic crisis periods. The World Bank responded to drought with two additional financing operations for the safety net program. Since 2020—during COVID-19 and then during the conflict and economic crisis period—the World Bank has mounted a significant response to the COVID-19 pandemic with an emergency response project that had three additional financing operations, additional financing for microfinance through both the Women’s Entrepreneurship Project and the Ethiopia Small and Medium Enterprise (SME) Finance Project, supplemental financing for the DPO series, and additional financing for the Enhancing Shared Prosperity Through Equitable Services project, among other efforts. It also prepared a locust response project, which then received additional financing. There were two projects to address issues related to refugees and displaced people and a project to respond to the conflict. It also secured additional financing for the urban and rural safety net programs in response to the economic crisis, drought, food insecurity, and conflict.

The portfolio’s growth was facilitated by a large proportion of additional financing, especially over the conflict and economic crisis period, which limited the number of Implementation Completion and Results Reports (ICRs) to 15 and opportunities for strategic course correction. The share of additional financing grew from 19 percent of newly approved projects during 2013–17 to 30 percent during 2018–23. Comparable countries saw a decrease in the number of projects consisting of additional financing, from 23 percent of projects to 19 percent (figure 2.5). In terms of commitments, additional financing for Ethiopia increased from 9 percent of new commitments during 2013–17 to 22 percent during 2018–23. Such a large reliance on additional financing meant that the Bank Group could extend the same interventions relatively quickly with minimal adjustments. This helped increase government resources during the COVID-19 pandemic and the economic crisis to support social protection and poverty alleviation in non-conflict-affected areas, as well as during the Tigray and subsequent conflicts. However, it also meant that there were few ICRs (only 15), which may have limited opportunities for learning and strategic rethinking and course corrections.

Figure 2.5. Share of Number of Projects That Are Additional Financing of Total Number of Projects Committed

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Figure 2.5. Share of Number of Projects That Are Additional Financing of Total Number of Projects Committed

 

Source: Independent Evaluation Group.

The World Bank allocated $4 billion to social protection throughout the evaluation period, making it the largest area of support, followed by public administration and agriculture. Figure 2.6 shows that social protection represented 22 percent of the World Bank’s total financing in FY13–23. The large size of this sector reflected the World Bank’s consistent support over the evaluation period for Ethiopia’s PSNP. Public administration projects accounted for $2.6 billion, or 14 percent of total financing during the evaluation period. This category’s large share of commitments is due to the wide variety of subsectors within it related to service delivery, including health, education, infrastructure services, and, in later years, flood management and human capital development. These service delivery projects increasingly were PforR projects. Agriculture accounted for the third-highest sector share of the portfolio, totaling $2.1 billion, or 12 percent of total financing, reflecting its importance in Ethiopia’s economy (see chapter 3). Industry, trade, and financial sector projects accounted for the fourth-largest share of World Bank commitments, with more than half of it attributed to DPF (see chapter 3).

World Bank disbursements increased during the evaluation period, in line with the portfolio’s growth. Social protection averaged 32 percent of total disbursements during the evaluation period, which was regularly the highest-disbursing sector apart from the years with DPO disbursements. The Health, Nutrition, and Population Global Practice projects increased disbursements to $114 million in FY20, the first year of the COVID-19 pandemic. Similarly, the Macroeconomics, Trade, and Investment Global Practice projects dramatically increased disbursements with the approval of the Growth and Competitiveness DPOs in FY19 and FY20. There was little change in disbursement patterns during the Tigray conflict despite the World Bank pausing new project approvals for several months during this time. Disbursements surged in FY23, driven by social protection, agriculture, health, and financial access projects (figure 2.7). The FY23 surge in disbursements—at a time when foreign exchange market parallel premium increased from 50 percent to more than 90 percent—was largely due to investment project financing, which increased by 68 percent in FY22 and made up 81 percent of FY23 disbursements, whereas PforR disbursements increased by only 6 percent in FY22.

Figure 2.6. World Bank Commitments by Sector and Strategy Period, FY13–23

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Figure 2.6. World Bank Commitments by Sector and Strategy Period, FY13–23

 

Source: Independent Evaluation Group.

IFC and MIGA expanded private sector participation in telecommunications and agriculture, but financial repression measures constrained their financial sector efforts. IFC and MIGA were able to take a bigger role in telecommunications after the government announced a greater openness to private sector investments with the 2018 reform opening and the Bank Group’s DPO engagement. Specifically, MIGA provided a guarantee for $1.0 billion in telecommunications, whereas IFC advised the government in designing the country’s first mobile telecommunications license and tendering telecommunications frequencies. IFC also engaged in two investment projects totaling $260 million (see box 3.2). The state’s dominance in the financial sector limited IFC’s and MIGA’s opportunities to provide long-term support to private financial institutions during the evaluation period. Accordingly, IFC focused on trade and supply chain finance during the first half of the evaluation period as part of its support for finance and insurance (figure 2.8). In addition, both IFC and MIGA supported projects in the agribusiness and food manufacturing space. Together, telecommunications, the financial sector, agribusiness, and food manufacturing accounted for 93.4 percent of IFC commitments and 91.1 percent of MIGA guarantees issued during the evaluation period.

Figure 2.7. World Bank Disbursements by Global Practice and Fiscal Year

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Figure 2.7. World Bank Disbursements by Global Practice and Fiscal Year

 

Source: Independent Evaluation Group.

Figure 2.8. The International Finance Corporation’s Ethiopia Investments by Industry and Strategy Period, FY13–23

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Figure 2.8. The International Finance Corporation’s Ethiopia Investments by Industry and Strategy Period, FY13–23

 

Source: Independent Evaluation Group.

Note: CPF = Country Partnership Framework; CPS = Country Partnership Strategy.

Adaptation of the World Bank’s Portfolio to Conflict

The Tigray conflict, which broke out in November 2020 and spilled over to other regions, forced the World Bank to adapt quickly once again. The Bank Group paused most of its programs in Tigray in response to the initial armed conflict in November 2020 and then stopped implementation entirely in that region in June 2021. The change in circumstances was highlighted by the Bank Group’s July 2021 designation of Ethiopia as a country classified as fragile and conflict-affected situations. That said, the Board of Executive Directors continued to approve new operations throughout FY21. However, Bank Group shareholders expressed concern about atrocities and the potential that the World Bank would inadvertently fund the conflict. As a result, the Bank Group paused the approvals for new lending in Ethiopia in late 2021, except for an emergency COVID-19 recovery operation, pending the completion of a Risk and Resilience Assessment (RRA). These abrupt changes occurred in 2020, when World Bank staff were largely not meeting in person because of COVID-19, and after November 2021, when staff were briefly evacuated from Ethiopia because of security concerns.

The Bank Group prepared the RRA rapidly while seeking to balance candid analysis with the document’s public disclosure. The RRA provided valuable information on and analysis of the conflict, but the interviews with World Bank staff indicated that the RRA was rushed, as the team had prepared the RRA in just 45 days between the Concept Note and the decision meeting. Some interviews indicated that the RRA did not carry out consultations with certain outside experts and stakeholders who could provide diverse views. Moreover, the World Bank’s decision to share the RRA with the government may have reduced the document’s candor, according to the interviews. This cautious approach was understandable in the context of several United Nations officials recently being declared as personae non gratae. Nonetheless, the RRA’s recommendations were overly broad and did not provide specific guidance on how to engage in a context where the government was a party to the conflict. However, the RRA’s completion allowed the World Bank to resume lending approvals in April 2022, for the Response-Recovery-Resilience for Conflict-Affected Communities in Ethiopia Project, which was designed to address the conflict situation.6 IFC lending resumed in June 2022.

The World Bank adapted its implementation approach in the wake of the conflict, including attempts to introduce TPI and monitoring. After the RRA, the World Bank limited new project approvals to those addressing basic needs for vulnerable populations and preserving human capital in what was called a more people-centered approach. The World Bank also sought to introduce TPI and monitoring in conflict-affected areas for new projects approved in FY22. During this time, disbursements continued uninterrupted outside of Tigray and other conflict-affected regions, which provided resources to the government so it could continue providing services during an economic crisis (figure 2.7).

The World Bank’s efforts to use TPI largely did not materialize because of government concerns about the high cost, which increased implementation and governance risks. TPI was meant to allow projects to continue to access areas affected by violence and maintain project implementation without the central government’s involvement, but the government raised concerns about its higher cost and sought to assume project implementation.7 The World Bank envisioned TPI for projects approved in FY22 and later for conflict-affected regions, but the government did not agree to the terms of TPI by the time the Tigray conflict ended in November 2022 (FY23); consequently, TPI was used only for a few projects. By May 2024, just $110 million of the $2 billion of commitments to Tigray were disbursed using TPI.8 This amount included United Nations agencies implementing $65 million to support PSNPs and $41 million to support the Response-Recovery-Resilience for Conflict-Affected Communities in Ethiopia Project.9 The World Bank also requested TPI in the Amhara and Oromia regions, which have been affected by violence since the end of the Tigray conflict, but the government refused this request as well. The continued reliance on the government for implementation during the conflicts has increased the World Bank’s implementation and governance risks.

The World Bank did not resume its engagement in Tigray until after the conflict ended. World Bank project implementation only gradually restarted in Tigray, starting with some pilot projects in 2023 and expanding implementation more widely in FY24. The restart of implementation in Tigray was delayed by extended negotiations with the government over TPI contracts, the introduction of an Interim Regional Administration to oversee Tigray’s reintegration, and the need for the World Bank to carry out project audits. The World Bank had prepared a damage and needs assessment with the government halfway through the Tigray conflict, in December 2021.10 The assessment estimated the region’s reconstruction needs at $19.7 billion. Despite this estimate, development partners have not committed meaningful sums to a reconstruction trust fund, and the World Bank has limited committed financing, largely as part of existing projects, for reconstruction in Tigray.

Security concerns and resulting travel restrictions since 2020 increasingly limited the World Bank’s access to project sites outside Addis Ababa. IEG interviews and survey data indicate that task teams were unable to visit several locations because of the COVID-19 pandemic or conflict-related travel restrictions. Thirty-seven percent of survey respondents (14 out of 38) stated that they were unable to carry out on-site supervision since FY20. Eighty-one percent of staff respondents said that project implementation was constrained or severely constrained by site access restrictions. Mission data for Ethiopia,11 from before the COVID-19 pandemic and the conflict, indicate that about one-third of missions conducted field visits outside of the capital. Once the COVID-19 pandemic–related travel restrictions were lifted in FY22, missions to Addis Ababa and outside Addis Ababa resumed at a rate similar to before the pandemic. However, the share of missions outside Addis Ababa dropped to 20 percent in FY23 and to 13 percent in FY24 as conflict spread to Oromia and Amhara (figure 2.9).

Figure 2.9. World Bank Group Missions to Addis Ababa and Outside Addis Ababa

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Figure 2.9. World Bank Group Missions to Addis Ababa and Outside Addis Ababa

 

Source: Independent Evaluation Group.

Staff turned to other off-site supervision tools because of site access restrictions. Task teams and the government also turned to other off-site supervision tools, such as reverse missions, photo and video evidence, iterative beneficiary monitoring, and the Geo-Enabling Initiative for Monitoring and Supervision. A task team leader indicated in an interview and in the IEG survey that they had tried to access trust fund resources for third-party monitoring.

The World Bank Group’s Portfolio Effectiveness

In Ethiopia, the Bank Group’s effectiveness was moderate, and its portfolio’s development outcome ratings declined over the evaluation period. The 2017 IEG Completion and Learning Review Validation (CLRV) rated the development outcomes of the FY13–16 CPS as moderately satisfactory.12 The 2024 CLRV rated the outcomes for the FY18–22 CPF as moderately unsatisfactory (table 2.1; World Bank, forthcoming-a). The Bank Group achieved or mostly achieved 72 percent of its indicators in the FY13–16 CPS, compared with 52 percent in the FY18–22 CPF. There were also indicator gaps, which hindered outcome monitoring. For example, most 2024 CLRV indicators were from 2021 or earlier because of the inability to monitor activities during the conflict and in the aftermath of the COVID-19 pandemic. As a result, it is uncertain whether projects have sustained results since 2021. The outcomes across CPS and CPF focus areas are discussed in further detail in appendix C.

The World Bank’s project performance ratings in Ethiopia were higher than CPS and CPF ratings, although they are based on a small sample. Only 15 projects closed and had ICRs prepared during the evaluation period—42 percent of the portfolio (figure 2.10). This low percentage was caused by a 40 percent growth in the World Bank’s Ethiopia portfolio between the first and second strategy periods and the increase in additional financing. Projects assessed by 15 ICRs and the corresponding ICR Reviews performed better than higher-level outcome indicators in the CPS and the CPF. Misalignments occurred where project-level outcome ratings did not reflect high-level outcomes in the CPS or the CPF (for example, for some education projects). In other areas, project performance and CLRV ratings were similar—for example, industrial parks were rated moderately unsatisfactory in both. Overall, 86 percent of operations in Ethiopia that closed during the CPE period received IEG outcome ratings of satisfactory (53 percent) or moderately satisfactory (33 percent). In comparison, the average for African projects was 75 percent. Investment project financing has a shorter median lifespan than in other parts of Africa—six years in Ethiopia compared with seven years in Africa. Implementation Status and Results Report ratings for projects without an ICR indicated slightly better outcome ratings, with all being in the satisfactory range: 4 percent highly satisfactory, 56 percent satisfactory, and 40 percent moderately satisfactory.

IFC investment projects evaluated during the CPE period were all rated less than satisfactory. During the evaluation period, IEG validated Expanded Project Supervision Reports for four IFC projects. Two agribusiness projects did not achieve their intended results (see chapter 3). A trade finance project helped Ethiopia import refined oil products in 2014 after the bank previously providing this service pulled back its engagement. This project achieved its objectives, but its short time frame did not allow IFC to track whether any project outcomes led to less-than-satisfactory ratings. An early equity investment in a gold mine yielded disappointing results because deposits were smaller than anticipated and the geography proved more challenging to mine than expected. Such early investments are inherently risky, but IFC could have taken more efforts to mitigate these risks.

Source: Independent Evaluation Group.

Note: CLRV = Completion and Learning Review Validation; CPF = Country Partnership Framework; CPS = Country Partnership Strategy.a. Out of 31 indicators, 2 were not verified.

Figure 2.10. ISR and ICRR Outcome and Bank Performance Ratings for Projects Approved During FY13–23

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Figure 2.10. ISR and ICRR Outcome and Bank Performance Ratings for Projects Approved During FY13–23

 

Source: Independent Evaluation Group.

Note: ICRR = Implementation Completion and Results Report Review; IEG = Independent Evaluation Group; ISR = Implementation Status and Results Report.

Gaps in monitoring and evaluation (M&E) weakened project oversight. IEG assessments indicate that two-thirds of projects closed during the evaluation period received a modest or negligible rating for M&E quality. Several issues contributed to this rating: (i) results frameworks often lacked appropriate indicators or baselines for tracking; (ii) management information systems underperformed, causing delays in monitoring progress and reporting against targets; and (iii) projects had insufficient M&E capacity, with limited efforts to improve it throughout the project life cycle.