Eritrea: International Aid Detailed

From Indian Ocean Newsletter, February 4, 1995

International fund donors for Eritrea who attended the World Bank's consultative group meeting in Paris in December (ION No. 652) tabled details of their financial commitments for 1995. In addition to already-known World Bank aid (US$ 25 million a year for three years), the European Union ($ 30 million this year plus possibly finance for a feasibility study for a "transport corridor" between Asmara and Addis Ababa), the European Investment Bank (ECU 8 million for telecommunications), the African Development Bank put up a programme for $ 34 million in loans to Eritrea in 1995 (out of total loans worth $ 81 million for the period 1995-1997) whilst the United Nations Development Programme will earmark $ 40 million and the International Fund for Agricultural Development has already started lowland irrigation projects with $ 18 million worth of loans.

With the bilateral donors, Italy has promised $ 50 million (with 60 percent to be released in 1995), Germany has undertaken to maintain the same level of aid as in 1994 (DM 35.2 million, for resettlement of returnees, private sector projects, agriculture, and drinking water supplies), the United States will supply $ 9 million of aid projects (health, demobilization, returnee resettlement), The Netherlands will supply $ 6 million (water treatment project for the town of Keren and training projects for Red Sea fishermen), and Japan will supply $ 2 million. No specific amount of aid was announced for Sweden, which is known to be interested in helping Eritrea in the energy and public administration sectors.

Great Britain has already released L1 million for 1994-1995 and will releasea similar sum for 1995-1996. Norway will keep its aid at a level comparable to 1994 (between $ 8 million and $ 9 million) for projects on returnee resettlement, primary education, telecommunications, petroleum, agricultural husbandry, and data processing. Switzerland has not announced any precise figureyet. Finland has already committed FIM 21 million ($ 4.3 million) for three projects and Denmark signed a financing agreement for $ 6.5 million in October 1994 and is planning a package worth $ 45 million for the period 1995 -1999.

France is envisaging a grant of $ 7 million (via the parastatal Caisse Francaisede Developpement) for airport, water supplies, and micro-enterprise projects, plus another $ 1 million in food aid.

Kuwait has promised $ 16.5 million for an electricity project and a grant of $ 1 million for public works (which comes on top of $ 25 million committed to buy generators for a power plant near Massawa). Saudi Arabia, currently the largest bilateral fund donor for Asmara, will make a grant of $ 5 million for building mosques and will make available $ 55 million in concessional loans ($35 million for electricity, $ 10 million for road construction between Mendefera and Barentu, $ 10 million for an agricultural project).

I.O.N.- The International Monetary Fund's newsletter of January 23 points out that Eritrea's budget position "deteriorated significantly" in 1994, to a deficit of about 13 percent of GDP. IMF notes that "pressures on the fiscal position are not likely to let up" in the next few years, and the IMF management board is therefore pressing the government to secure "a sustainable fiscal position" including broadening the country's tax base, drawing up a 1995 budget outlining priorities for expenditure, slowing down the public wage bill, and "targeting social 'safety net' expenditure to those most in need of assistance".