Is aid in Ethiopia a tool for, or a hindrance to, poverty reduction?

"We are concerned that decisions to continue providing budget support (by whatever name) to the Ethiopian government at a time when it is apparent that the regime’s incentives will lead to aid abuse are in part driven by the need to keep lending money at any cost, even if it hurts Ethiopia’s poor. Sadly, ‘aid dependency’ goes both ways."
Aid to repressive and unstable regimes is questionable at best, anti-poor at worst.

The effectiveness of aid is most severely compromised when government repression against its own people, especially the poor, is combined with a high level of political instability and unpredictability – a situation which accurately describes Ethiopia. It is deeply problematic to provide aid to governments that show a disregard for the rural poor by engaging in violence against them. In Ethiopia, the poor continue to suffer a “crackdown in [the] rural areas, far from the eyes and ears of international observers in Addis Abeba”1. Access to key inputs such as fertiliser are frequently denied those farmers who are, or are perceived to be, supporters of opposition parties.

Budget support to repressive and unstable regimes is outright counterproductive, unethical, and provides an avenue for continued repression, including repression of the rural poor.

While continuing to channel aid through the government in such contexts is at the very least awkward, it is unambiguously anti-poor to provide budget support to such regimes. After last November’s massacre of demonstrators as well as bystanders, including several children, by Ethiopian security forces, the Donor Assistance Group (DAG) for Ethiopia wrote a letter to the government acknowledging that “[s]uccessful development outcomes in Ethiopia depend upon real and sustained progress on human rights […] If these issues are not appropriately and consistently, our assistance will have a reduced impact on the poor as well as prospects for Ethiopia’s progress on sustainable development overall.”2

Donor skepticism about the sound use of public funds by an autocratic regime in a fragile state is warranted. The Ethiopian regime under prime minister Meles Zenawi has allocated a substantial amount of resources from the “security and order” budget to finance the expenses of rounding up and detaining in military camps over 40,000 youth suspected of supporting the opposition, and has used US-financed humvees, intended for anti-terrorism efforts, instead as vehicles from which they shot at demonstrating citizens of Addis Abeba, leading the US ambassador to declare that no more Humvees will be provided to the Ethiopian government.3 Gross misuse is not limited to defence and security budgets. For example, the government has used funds earmarked for education for a two-week long highly politicised mandatory training of tens of thousands of high school and elementary school teachers on matters of “peace and security”. This training was intended to make the teachers cooperative in denouncing high school and elementary school children who have been protesting in many towns in Ethiopia against the imprisonment of opposition leaders and human rights activists. Trials on government charges of “treason and genocide” against these political prisoners commenced this week4 and are expected to further destabilise the country.

The above are only a few examples of how government resources are being diverted from pro-poor uses to instead subjugate Ethiopians and ensure political control by the ruling party. For repressive governments with negligible popular support whose actions have created political instability — i.e. governments like the Meles Zenawi regime — all the incentives are in place to use donor money, especially aid of the flexible sort (budget support) to try to cement their military and political power.

Hence the donor community pledged to stop giving budget support to the government of Ethiopia

In December 2005 and January 2006, donors which provide budget support to Ethiopia (which include the African Development Bank, Canada, the European Commission, Germany, Ireland, Sweden, the UK, and the World Bank) declared publicly that they would withdraw budget support of the amount of $375 million and channel it through nonbudgetary means to the poor. World Bank country director Ishac Diwan reiterated this in various interviews with the international press.5

Unfortunately, the World Bank, DfID, CIDA, and Ireland are on the verge of betraying Western taxpayers as well as the Ethiopian people: By reintroducing budget support through the back door.

After the public and unambiguous declarations that budget support will be discontinued to Ethiopia, it is a great disappointment to see that the World Bank country director Ishac Diwan now intends to reintroduce budget support through the “back door”, in the form of a loan entitled “Protection of Basic Services”. Initially, this project was designed so as to channel funds not through the federal government but through the district governments. It does not have the safeguards that accompany standard Bank investment projects. Instead, it supports district governments’ budgets, which means it is still a budget support loan. Three bilateral donors signed up to this betrayal of the Ethiopian people and their own taxpayers: Canada, Ireland, and the UK.

The project design recently took yet another iteration, and now it has become no longer a district budget support loan but a region budget support loan (regions are administrative units larger than districts). It is disturbing to see that introduction in the PID attempts to claim that this is no longer budget support, when the ensuing project description clearly lays out that the project provides block grants to the regions. Each of the 9 regions is controlled by the same ruling party that is also responsible for the violent crackdown in rural areas.

When the international community does not put its money (aid) where its mouth (i.e. lip service to good governance) is, and when autocratic rule and lack of political competition mean that the rural poor do not have the ability to hold the government to account for the delivery of public services, statements such as those made by World Bank country director Ishac Diwan on a popular Ethiopian website6 about the so-called “Protection of Basic Services” (PBS) project, seem disingenuous.

As scholars, activists, and professionals, we are deeply concerned about endemic poverty in our country, and about the lack of voice of the rural poor to demand better services and policies that can enable them to live in dignity and realise the gains from their own search for decent living standards. As such, we are deeply distressed by the discrepancy between donors’ utterances about commitment to the poor, and their actions which show a continuation of aid business as usual in countries like Ethiopia in which the rural population is being suppressed and in which developments suggest tense political fragility. We are also keenly aware that, while there are many dedicated and competent staff in the Bank, incentive structures for promotion and recognition do not reinforce, but rather work against, motivations of staff to work toward reducing poverty. We are thus concerned that decisions to continue providing budget support (by whatever name) to the Ethiopian government at a time when it is apparent that the regime’s incentives will lead to aid abuse are in part driven by the need to keep lending money at any cost, even if it hurts Ethiopia’s poor. Sadly, ‘aid dependency’ goes both ways.

Be one of the voices calling for aid to be a tool, not a hindrance, to poverty reduction.

As a professional commited to making aid a tool for promoting growth and reducing poverty, please contact the responsible Bank officials (contact information below), and urge them:

  1. to adhere to their original public declaration that budget support will be discontinued. Budget support is a suitable and appropriate lending instrument for certain types of governments in certain kinds of contexts. The donor community spoke loudly and clearly that Ethiopia is no longer such a government.
  2. to channel resources to the poor through the standard investment project vehicle. We owe it to the rural population in Ethiopia that strong safeguards are in place to obviate diversion of public funds for political use in a context where this is otherwise highly likely to happen.
  3. to incorporate in the project a strong component that would seek to empower the poor to demand quality public services. Incentives for efficient delivery of basic services at the local level are only realised when beneficiaries become clients to whom suppliers are accountable.
  4. to join those voices in the international community which unequivocally call for the government to refrain from creating in political conditions that perpetuate poverty, including human rights violations in the rural areas, where the vast majority of the poor reside.

Lead Economist Trina Haque
Tel: (202) 458-5775
Fax: (202) 473-8107

Country Programme Coordinator
Jill Armstrong
Tel: (202) 473-8471
Fax: (202) 473-5453

Country Director
Ishac Diwan

Vice President, Africa Region
Gobind Nankani

1 Human Rights Watch, 13 Jan 2006:
“Ethiopia: Hidden Crackdown in Rural Areas – Independent Inquiry should Investigate Rural Violence”.
Letter by Development Assistance Group (DAG) to the Ethiopian Government, 15. November 2005.
3 United Nations IRIN News, 5. Jan 2006:
Ethiopia: Trial of Opposition Activists "Divisive" – US Diplomat.
4 Examples of media coverage of these trials include: The Economist, 16. Mar 2006:
Injustice will be done. Recently (2. May 2006) a detailed report on the trials was issued by Amnesty International (“Ethiopia - Prisoners of conscience on trial for treason: opposition party leaders, human rights defenders and journalists”).
5 E.g. see Financial Times, 29. Dec 2005:
Donors Plan to Withhold $375 million from Ethiopia.
6 Ishac Diwan, 10 Mar 2006:
“World Bank strategy for Ethiopia? Here are a few salient points” on