EU signs $360m euro aid deal with Ethiopia for roads, health

ADDIS ABABA - The European Union signed a development grant with Ethiopia on Monday worth 212.4 million euros (S$360 million) to help finance road construction and projects targeting maternal health and drought resilience.

Ethiopia, Africa's second most populous country after Nigeria, is midway through a five-year economic plan that foresees almost tripling the country's road network and beginning the building of 5,000 km of new railway lines.

Addis Ababa's big push on infrastructure is aimed at connecting remote regions and has propelled the economy to double-digit growth for much of the last decade.

"Expanding and upgrading ... (the) road network is playing a central role in the country's economic development - notably in improving access for the rural population to markets and basic service," Andris Piebalgs, the EU's Commissioner for Development, told a signing ceremony.

Once run by communists, Ethiopia's economy is now sub-Saharan Africa's fifth biggest economy, leap-frogging Kenya, after a decade of robust growth. But it remains one of the world's largest aid recipients.

The package includes 49 million euros earmarked for road building. Another 50 million euros will be to help fight the effects of drought in the country's arid south and east and 40.4 million euros will go to improving maternal health.

Earlier this month the United Nations said Ethiopia was making slow progress in improving maternal health and that the rate of maternal mortality - dying in childbirth - was among the highest in the world.

The International Monetary Fund projects the Ethiopian economy will expand 7.5 percent in each of the next two fiscal years but cautions it needs to be restructured to encourage more private sector investments to avoid a slowdown.

There are signs the huge public spending is hampering the private sector's access to credit, the IMF says.