US International Development Finance Corporation (DFC) to Support Ethiopia with $5 Billion

Adam Boehler, Chief Executive Officer of the US International Development Finance Corporation (DFC), visited Ethiopia from November 13-14 to promote US investment in Ethiopia and strengthen relationships with key partners in support of mutual development goals.

The visit marked Boehler’s first official travel to Ethiopia as CEO of the DFC, a new U.S. Government agency that combines and modernizes the Overseas Private Investment Corporation (OPIC) and USAID’s Development Credit Authority (DCA).

Equipped with a more than doubled investment cap of $60 billion and new financial tools, DFC has more resources to mobilize private sector capital to address development challenges and advance U.S. foreign policy in priority regions such as Sub-Saharan Africa.

The DFC to invest $5 billion in Ethiopia

As a result of that visit, the US is now ready to invest $5bn in Ethiopia through the DFC, in an effort to support private-sector reform and counter China’s influence in one of Africa’s fastest-growing economies.

Ethiopia’s finance minister, Ahmed Shide said “More than $5bn is expected in the coming three to five years,” and added that the US institution had expressed interest in investing in telecoms, geothermal energy, logistics and sugar, all sectors undergoing some degree of privatisation.

In an interview in Addis Ababa, Mr Ahmed said the deployment of funds would depend on Ethiopia’s successful implementation of “certain reform measures”. Those changes are understood to be related to foreign investors’ ability to hold offshore accounts, repatriate foreign currency and settle disputes under New York arbitration rules.

Washington is keen to encourage the expansion of the private sector in Ethiopia, a strategically located country of 110m people, which has historically followed a state-led development model, partly funded by infrastructure investment from China.

The US plans to Tackle China’s Influence in Africa

The DFC replaced the US Overseas Private Investment Corporation (OPIC) in 2018 with an increased lending capacity of $60bn and a remit to help Washington’s foreign policy aims, including countering the influence of China — and Russia — in Africa.

The agency, which has the support of Donald Trump, the US president, will back American and other private companies investing in developing countries through loans, insurance and now equity, a tool used by European equivalents such as Britain’s CDC Group.

Last month, Mike Pompeo, US secretary of state, told an audience in Addis Ababa, Ethiopia’s capital, that Washington was offering an attractive investment alternative. Without naming China, he said that “authoritarian countries” came with “empty promises” and encouraged corruption and dependency. Mr Ahmed said the anticipated US investments would help Ethiopia’s efforts to correct the side-effects of a development model that had produced 15 years of near double-digit growth but had created what he called “macro imbalances”, including balance of payments problems and inflation.

READ MORE: China Injected $72 in FDI Billion into Africa between 2014 And 2018

Ethiopia’s Growing Economy

In December, Ethiopia clinched a $2.9 billion IMF programme, one of the biggest in the fund’s history in Africa, in an endorsement of Ethiopia’s so-called Homegrown Economic Reform plan. Under Abiy Ahmed, prime minister since 2018 and Nobel Peace prize winner, Ethiopia has committed to opening up its economy and is planning a series of privatisations. Those include the sale of a 49% stake in Ethio Telecom, the world’s largest remaining telecoms monopoly, and the allocation, through a competitive auction, of two new telecoms licences.

Mr Ahmed said he expected the telecoms sale to be completed in four to six months and to raise several billion dollars, though elections scheduled for August could delay the sales, according to some observers. MTN of South Africa, Orange of France, Vodafone of the UK — part of a consortium with Vodacom of South Africa and Safaricom of Kenya — and Etisalat of the United Arab Emirates are among those that have expressed interest in the telecoms auction.

While no US company is expected to bid, the DFC is permitted to invest in foreign companies aligned with US foreign policy goals.