PPIAF’s Pivotal Role in Catalyzing Infrastructure Growth in Ethiopia
Ethiopia has made significant progress in harnessing the private sector for infrastructure development, recognizing its vital role in driving economic growth and sustainable development. PPIAF has been a key partner in these efforts, enhancing private sector involvement through the establishment of the country's public-private partnership (PPP) framework.
Our contributions include drafting comprehensive guidelines and enacting legislation that fosters PPPs in infrastructure, resulting in a pipeline of approximately 34 projects. In collaboration with donor partners, we also established the Public-Private Partnership Coordination Forum, which provides training and facilitates knowledge exchange with international experts to inform effective framework design and legislation for Ethiopia’s PPP unit.
In addition to these developments, the National Bank of Ethiopia introduced a significant foreign exchange reform in 2024, shifting to a market-driven system for determining exchange rates, moving away from the previous government-regulated framework. Notably, it removes the previous priority listing for foreign currency allocations, improving access for foreign investors seeking currency for imports and profit repatriation, thereby enhancing the overall investment climate. This directive has important implications for Public-Private Partnerships (PPPs), as it retains provisions from earlier regulations regarding foreign currency accounts for critical sectors like PPPs, mining, and infrastructure. The reform is expected to streamline transactions and improve access to foreign currency, contributing to more stable exchange rates—an essential factor for the long-term sustainability of PPP projects.
At the municipal level, PPIAF has worked with local governments to boost revenue generation. Our efforts supported the adoption of three-year Capital Investment Plans (CIPs), addressing urban local governments' responsibilities for services and infrastructure, including rehabilitation and new investments. Additionally, we facilitated improvements in financial reporting and revenue enhancement strategies, leading to significant revenue growth for municipalities, particularly in Addis Ababa, despite pandemic-related challenges.
PPIAF’s impact extends across several critical sectors.
In telecommunications, we played a pivotal role in Ethiopia's transition from a state-owned monopoly to a competitive market. Our support facilitated Safaricom’s entry as the second operator with a $1 billion license. A comprehensive spectrum management review, including spectrum allocation planning, demand forecasting, and pricing, was key to this transition. We also provided technical assistance to the Ethiopian Communications Authority, redefining frequency bands, recommending spectrum refarming, and developing a pricing model. These efforts laid the groundwork for a dynamic digital economy, fostering competition and innovation.
In the energy sector, we worked with the Ministry of Water and Energy to conduct smart grid assessments, address gender disparities, and promote private sector participation in expanding energy access. PPIAF also helped Ethiopian Electric Power (EEP) develop a strong PPP pipeline for energy projects. By 2024, EEP had made significant progress, establishing a PPP unit in 2019 and growing its team to 16 members, most of whom are certified through Global PPP programs funded by PPIAF. EEP’s project pipeline now includes over 20 energy projects, including wind, solar, geothermal, and hydroelectric power. Notable achievements include signing Power Purchase Agreements for two geothermal projects and advancing five wind projects with feasibility studies supported by IFC and AFD. The Tulu Moye Geothermal Power Plant, Ethiopia’s first build-operate-own PPP, reached financial close in 2021 with PPIAF support.
In water management, PPIAF facilitated workshops to build consensus on private sector participation, addressing bottlenecks and exploring growth opportunities. This led to the creation of the Water Resources Development Fund, which supports sustainable water management. Additionally, since 2018, PPIAF has supported the Addis Ababa Water and Sewerage Authority in preparing and procuring a four-year $15.4 million performance-based contract to reduce non-revenue water—critical for meeting rising urban water demand and lowering operational costs.
In agriculture, PPIAF has played a crucial role in improving food security and economic stability by supporting irrigation projects and fostering private sector participation. A major milestone was the development of PPP structures and tender documents for the $6.2 million Megech-Seraba irrigation services contract, signed in 2012 and completed in 2020. This contract, Ethiopia’s first large-scale irrigation PPP for smallholder farmers, involved a private operator overseeing construction, managing water users’ associations, and ensuring long-term sustainability. PPIAF’s involvement, including an options study, helped shape the contract’s focus on efficient construction, reliable service, and enhanced training for smallholders. Our efforts help boost agricultural productivity, helping farmers generate commercial surpluses and strengthen value chains, marking a transformative step for both Ethiopia’s irrigation sector and small-scale farming communities.
In the transport sector, PPIAF has also been instrumental in urban transport planning, particularly in Addis Ababa, where it helped reform bus transport framework. Our efforts helped improve public transport services and alleviate traffic congestion by engaging the private sector. PPIAF’s efforts in solid waste management have also addressed critical environmental and public health challenges. Despite early obstacles such as budget constraints and weak infrastructure, an assessment of waste management led to significant improvements. By proposing legal changes and outlining options for private sector participation, we helped advance legislation that facilitated private sector involvement in waste collection, transportation, and disposal, contributing to effective waste management practices across Ethiopia.
Each year, PPIAF evaluates its support across various countries to assess the progress of infrastructure projects that benefit from its assistance. This year’s impact assessment focused on Ethiopia.
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