Eritrea Obtains US$50 Million From World Bank

News Release No:2004/13/AFR

Washington DC, July 8, 2004 – The World Bank Board of Executive Directors last Tuesday, July 6, approved an International Development Association (IDA) credit of US$29 million and an IDA Grant of US$21 million in support of power distribution and rural electrification in Eritrea.

“The IDA credit and grant will promote efficiency, safety, environmental protection and financial sustainability in the power sector in Eritrea”, said Paivi Koljonen, the World Bank’s Task Team Leader for the project.

The Eritrea Power Distribution and Rural Electrification Project, as it is known, will support the Government’s power sector reform program including the establishment in the country of a modern institutional and regulatory framework governing electricity production, transmission, distribution and sales.

“The project will expand access to electricity, improve the security of electricity supply, and strengthen institutional capacity within the energy sector”, Koljonen added, pointing out that this is particularly important in Eritrea, where access to electricity is low, the existing power distribution system is old, and sector institutions are undergoing transformation.

While 86 percent of urban households have access to grid electricity in Eritrea, notably within the capital Asmara, only 3 percent of the rural population has access.

The first of the project’s four components focuses on rehabilitating and expanding the 40-to-50 year-old Asmara Distribution System for a total US$34 million, of which US$29 is IDA credit financed.

The second component aims to extend rural electrification to about 80 villages and small towns around four main towns – Keren, Barentu, Dekemhare, and Adi Keih – for a total of US$16.4 million of which US$12.4 million is IDA grant financed.

The third component consists of the Government of Eritrea establishing a Rural Electrification Fund to finance capital subsidies to qualifying schemes to electrify additional villages. This component will be funded through an IDA post-conflict grant.

The fourth component will build institutional and human capacity aimed at promoting increased efficiency in power sector operations and future cooperative and private sector participation in the sector for a total of US$4.7 million of which US$4.5 million is IDA grant financed.

The final component aims at environmental monitoring and mitigation and is funded for a total US$520 000 of which US$370 000 is IDA grant financed.

The IDA credit is provided at the standard commitment fee of 0.5 percent, a service charge of 0.75 percent, and a maturity of 40 years, including a 10-year period of grace. The Government of Eritrea and the Eritrean Electric Corporation will finance the remaining costs of the project.

Media Contact
In Washington:
Herbert Boh (202) 473 3548
hboh@worldbank.org
Aby Toure (202) 473 8302
akonate@worldbank.org

For more information on the World Bank’s work in sub-Saharan Africa visit: http://www.worldbank.org

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