World Bank approves $350 million fund for Ethiopia's digital identification initiative
The World Bank has recently approved a $350 million finance package for Ethiopia's digital identity drive, known as Fayda. This initiative aims to improve financial inclusion in the East African country, with Ethiopian banks set to mandate Fayda as the primary means of identification for financial transactions by 2024.
The funding for the Fayda project includes $214 million for inclusive issuance, $68 million for technical infrastructure, $21 million for building infrastructure, $35 million for service delivery, and $12 million for project management. Most of the funding comes under the World Bank's Digital ID for Inclusion and Services project.
However, Ethiopia is currently facing financial challenges. The country recently missed a scheduled Eurobond repayment due to insufficient foreign exchange, and its foreign reserves are depleted, with a total debt portfolio valued at $28.2 billion at the end of March. The World Bank's funding could be crucial, given Ethiopia's extensive debt portfolio and limited foreign exchange to meet local economic needs.
Preliminary talks have been held, but as of now, there is no agreement yet on an emergency relief package from the International Monetary Fund (IMF). Ethiopia is also seeking a temporary waiver on its debt payments to Chinese creditors and an agreement in principle on further debt relief with its bilateral creditors.
Yodahe Zemichael, the executive director of Ethiopia's Fayda program, stated that the World Bank's disbursement is crucial for implementing the ID project. The project, if successfully implemented, could prove pivotal for various projects in the conflict-ravaged country.
In addition to the Fayda project, the World Bank has also approved a $300 million loan to finance the Fayda Program in Ethiopia, aiming to improve sustainable agricultural productivity and market access for smallholder farmers.
The International Development Association (IDA) of the World Bank typically provides grants and low-interest loans to 74 of the world's poorest countries, 39 of which are in Africa. A part of the Fayda project's funding, $50 million, is a grant for host communities and refugees.
The Fayda project is a significant step towards Ethiopia's digital transformation, aiming to improve financial inclusion and service delivery. The country's successful implementation of the project could set a precedent for other African nations seeking to leverage digital solutions for economic growth.
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