Ethiopia Compels Private Banks to Buy Bonds to Fund Development
April. 08 2011
Ethiopia will compel private lenders to purchase government bonds equivalent to 27 percent of their annual loans to help fund development in the country, a central bank official said.
A policy directive has been issued to ensure banks provide funds for long-term infrastructure projects, National Bank of Ethiopia Deputy Governor of Monetary Stability Yohannes Ayalew said in an interview yesterday in Addis Ababa, the capital.
“Banks are meant to contribute toward development projects,” Yohannes said.
Ethiopia needs to spend $5.1 billion annually over the next decade to address a shortage of power, roads and telecommunications infrastructure, according to a World Bank report published last year. That level of investment is beyond what the government can currently afford, according to the report.
Projects currently under way in the Horn of Africa country include a $6 billion program to build a 2,395-kilometer (1,488- mile) railway network, according to the Ethiopian government. Last month, Water Minister Alemayehu Tegenu said the country will build a 5,250 megawatt hydropower dam in the Nile River basin at a cost of $4.76 billion. The project will be funded partly through the sale of government bonds, Alemayehu said.