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International Partnerships

Budget support in Ethiopia helps industrialisation and employment while mitigating Covid-19 effects on vulnerable households

Recognising the remarkable efforts made by the Government of Ethiopia to foster job creation, the European Union has made an important commitment in support of the 'Ethiopian Jobs Compact' with a €56 million contribution, covering the period from 2019 to 2021.

The Government of Ethiopia has initiated an ambitious industrial development policy, which aims to create 2 million direct jobs in the coming decade. This will be achieved mainly by developing and expanding a labour-intensive manufacturing sector, based in various industrial parks across the country.

The 'Ethiopian Jobs Compact', is a joint agreement between the Ethiopian Government, the EU and other donors (the World Bank, DFID, and the European Investment Bank). It is one of the main instruments supporting ambitious job creation plans: 100,000 jobs, of which 30,000 for refugees in the framework of the Comprehensive Refugee Response Framework (CRRF) will be created through investment in 3 industrial parks. The aim is to support the industrialisation, employment, and refugee policies of the government so that decent jobs can be created for Ethiopians and refugees.

Job creation Ethiopia

The EU has been actively engaged with the government in policy dialogue on the investment climate and investment promotion, on business exchange, as well as on the Comprehensive Refugee Response Framework (CRRF), labour administration, and job creation agenda. The Government of Ethiopia made important progress in several areas so far, adopting important policies such as the 10-year Investment Promotion Strategy, the Industrial Park Development Corporation (IPDC) Transformation Plan, the Labour Proclamation, and several working procedures on refugees’ rights to work.

With the outbreak of Covid-19, the government adopted a series of measures to contain the pandemic in Ethiopia, including the declaration of a 5-month state of emergency. The consequences of the Covid-19 crisis will go far beyond health and will have an important impact on employment and the economy. Plausible assumptions suggest that 750,000 to 1.5 million workers could be affected across Ethiopia in sectors such as horticulture and manufacturing, jeopardising the country’s economic development efforts.

Recognising these challenges, the EU rapidly mobilised an additional €6 million (in addition to the already committed €50 million) to support the Government of Ethiopia in mitigating the socio-economic impact of the Covid-19 pandemic on workers in vulnerable employment. This will be achieved through direct support to a newly established emergency social protection scheme integrated into the long-running social programme - the Urban Productive Safety Net Programme (UPSNP). The newly-mobilised funds will support the Urban Job Creation and Food Security Agency (UJCFSA), under the Ministry of Urban Development and Construction, with the provision of cash handouts to mitigate the negative economic effects of the pandemic on selected vulnerable households.

The impact of Covid-19 a on communities, families and societies has demonstrated the importance of supporting each other. The European Union is ready to continue working against the challenges that the pandemic has presented to Ethiopia and the world.