The World Bank has approved US$200 million in financing for a new phase of Ethiopia’s flagship social protection initiative aimed at supporting vulnerable households and strengthening livelihoods across the country.
The funding will support the sixth phase of the Productive Safety Net Program (PSNP 6), a long-running programme designed to improve food security, create jobs and build resilience among poor communities.
The World Bank said the initiative will help families meet immediate needs while enabling them to develop more sustainable sources of income.
Under the new phase, around 700,000 people are expected to receive support to create or expand small businesses, through practical skills training, mentoring and basic financial assistance.
“The PSNP 6 will help families meet their immediate needs and build resilience by enabling them to access better and more sustainable jobs, create community assets and invest in human capital,” said Maryam Salim, the World Bank’s director for Ethiopia, Eritrea, South Sudan and Sudan.
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The programme also aims to address long-term development challenges such as childhood malnutrition and climate vulnerability by supporting community-based projects and strengthening household income opportunities.
Ethiopia continues to face major social and economic pressures despite relatively strong economic growth.
The country recorded 8.1 percent economic growth in the 2023/2024 fiscal year, but widespread poverty persists. The World Bank estimates Ethiopia’s gross national income per capita at around US$1,020, placing it among the world’s lower-income economies.
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Economic challenges have been compounded by a range of social pressures including political and ethnic tensions, humanitarian crises and persistent inequality.
Frequent droughts, rising food prices and limited employment opportunities have further strained household incomes, making it difficult for many families to meet basic needs.
The Productive Safety Net Program has been one of Ethiopia’s central tools for tackling food insecurity and rural poverty.
Through public works and livelihood support, communities participating in the programme have helped restore degraded land, conserve water resources and rehabilitate local infrastructure.
Projects carried out under earlier phases have included the construction and rehabilitation of schools, early childhood development centres and health clinics, as well as environmental restoration initiatives aimed at improving agricultural productivity.
The programme has also promoted income-generating activities by helping households diversify their livelihoods and build small enterprises.
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Since its launch, the safety net programme has supported millions of food-insecure households across Ethiopia and has become one of Africa’s largest social protection initiatives.
The Ethiopian government has also adopted a broader national social protection policy aimed at strengthening systems that shield citizens from economic shocks and social vulnerability.
By combining short-term assistance with longer-term livelihood support, policymakers hope the programme will help communities become more self-reliant while improving food security and resilience to climate-related shocks.
The new financing from the World Bank is expected to expand these efforts as Ethiopia continues to grapple with poverty, environmental pressures and the need to create more employment opportunities for its rapidly growing population.
Ethiopia joined the World Bank in 1945, making it one of the early African members of the institution. Since then, the Bank has financed a wide range of projects aimed at improving living standards and strengthening the country’s economic foundations. Over time, Ethiopia has become one of the largest recipients of World Bank support in Africa.
The World Bank’s assistance to Ethiopia is mainly provided through its concessional financing arm, the International Development Association (IDA), which offers low-interest loans and grants to the world’s poorest countries.
Scale of Support
Over the years, the World Bank has committed tens of billions of dollars to Ethiopia across sectors including agriculture, energy, transport, education, water supply and social protection. The institution’s portfolio in the country has often been among the largest in Sub-Saharan Africa.
World Bank financing has helped Ethiopia fund major infrastructure projects, improve public services and support programs aimed at reducing poverty and boosting economic growth.
Key Development Areas
The Bank’s involvement in Ethiopia has focused on several key sectors:
1. Infrastructure and Energy
The World Bank has supported investments in electricity generation, transmission and rural electrification to expand access to power. It has also financed roads and transport corridors to improve connectivity across the country.
2. Agriculture and Rural Development
Given that agriculture employs a large share of Ethiopia’s population, the Bank has funded projects aimed at improving agricultural productivity, irrigation systems and food security.
3. Social Protection Programs
One of the most notable initiatives supported by the World Bank is the Productive Safety Net Programme, which provides food or cash assistance to vulnerable households in exchange for participation in public works projects. The programme has been widely credited with helping reduce extreme poverty and strengthen resilience against drought.
4. Human Development
The Bank has invested heavily in education and healthcare initiatives, helping expand access to schools, improve health services and strengthen Ethiopia’s human capital.
Economic Reform Support
In recent years, the World Bank has also supported economic reforms aimed at modernising Ethiopia’s economy, improving the business climate and encouraging private sector investment. These reforms have included measures related to financial sector development, telecommunications liberalisation and state-owned enterprise restructuring.
Humanitarian and Recovery Support
Ethiopia has faced multiple challenges in recent years, including conflict, drought and economic pressures. The World Bank has provided financial support for humanitarian assistance, recovery efforts and programs aimed at rebuilding livelihoods in affected regions.
Strategic Importance
Ethiopia, with a population of more than 120 million people, is one of the largest economies in East Africa and plays a strategic role in regional stability and development. As a result, the World Bank views the country as a key partner in advancing development goals across the Horn of Africa.
Current Role
Today, the World Bank continues to support Ethiopia through a broad portfolio of development projects and policy assistance, focusing on poverty reduction, climate resilience, infrastructure development and economic transformation.
Through these efforts, the institution aims to help Ethiopia achieve sustainable growth while addressing structural challenges such as unemployment, climate vulnerability and the need for inclusive development.
