World Bank provides Ethiopia with $350 million for the development of its digital identity system
Ethiopia is seeking an emergency relief package from the International Monetary Fund (IMF) as the country grapples with a depleted foreign reserve and a total debt portfolio valued at $28.2 billion at the end of March. Last week, Ethiopia missed a scheduled Eurobond repayment due to insufficient foreign exchange.
However, the East African country has received a boost with the World Bank's approval of a $350 million finance package for Ethiopia's digital identity drive, named Fayda. The World Bank's funding could be particularly significant due to Ethiopia's extensive debt portfolio.
The digital ID drive aims to improve Ethiopia's financial inclusion and is expected to be crucial for implementing the project, according to Yodahe Zemichael, the executive director of Ethiopia's Fayda program. The World Bank has allocated 70% of the package to infrastructure development, 20% to capacity building, and 10% to program management and evaluation.
$50 million of the package is a grant for host communities and refugees. Official reports suggest that $214 million has already been earmarked for inclusive issuance, and $68 million for Fayda's technical infrastructure. The breakdown of the funding includes $21 million for building infrastructure, $35 million for service delivery, and $12 million for project management.
The full rollout of Fayda is scheduled for 2024, after a pilot phase that enrolled 3.5 million people in 2022. Ethiopian banks are expected to mandate Fayda as the primary means of identification for financial transactions by 2024.
The World Bank's funding comes under the World Bank's Digital ID for Inclusion and Services project. Most of the funding comes from this project.
In addition to the World Bank's support, Ethiopia recently secured a temporary waiver on its debt payments to Chinese creditors and an agreement in principle on further debt relief with its bilateral creditors.
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. The IDA is providing the funding for the Fayda project.
The World Bank's financing package for the Fayda project could help Ethiopia meet local economic needs since it has less foreign exchange due to its debt portfolio. The digital ID drive is expected to improve financial inclusion in Ethiopia, a significant step towards economic recovery.
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