An ‘age of choice’ for infrastructure financing? Evidence from Ethiopia

Research reports and studies
April 2017

Primarily implemented at the national and subnational levels, the Sustainable Development Goals (SDGs) – also known as ‘Agenda 2030’ – set out a range of ambitious international development goals and targets. To achieve these goals, financial resources will have to be scaled up, especially financing for infrastructure.

There is evidence of a lack of strategic management of sources (and providers) to finance the infrastructure sector, despite the large volume of funds channelled and priority attributed to this sector in national development strategies. On top of that, very few studies have used sector-specific frameworks to analyse the changing finance landscape and the challenges it poses to recipient country governments. This study on the infrastructure financing landscape in Kenya – together with a companion report on Ethiopia – aims to fill this gap by identifying the approaches and strategies that recipient country governments have in place when negotiating with different finance providers and what lessons can be learnt from the country case study.

This report finds that Ethiopia has been prioritising infrastructure development in its national strategy, the Growth and Transformation Plan II (2016–2020), and it is among the largest recipients of external finance to the infrastructure sector in Sub-Saharan Africa. But the government could strengthen its policies and practices when it comes to infrastructure financing. This includes developing a fully fledged debt management strategy, increasing information-sharing on public and external finance projects, increasing efforts to foster more inclusive coordination between development partners, promoting cofinancing arrangements among development partners as well as evaluating the opportunity costs of speed of delivery and implementation.