Recently, HaqCheck observed controversial statements on social media, mainly on Twitter, in the context of the World Bank’s announcement of financial provision to Ethiopia.
Some said that the support was a loan while others stated that the financial provision was a grant.
Here are some of the contrasting statements that appeared on Twitter regarding the issue:
The World Bank announced on Apr 12, that it approved a 300 million US dollars grant for Ethiopia. The grant aims at helping the country address the aftermath of the conflict in five regional states including Tigray, Afar, Amhara, Oromia, and Benishangul Gumuz.
The Bank stated that the support will be given to Ethiopia in the form of an International Development Association (IDA) grant for the Response-Recovery-Resilience for Conflict-Affected Communities in Ethiopia Project.
What is an IDA grant?
The International Development Association (IDA), established in 1960, is one wing of the World Bank. The IDA and International Bank for Reconstruction and Development (IBRD) together form the World Bank. The former provides financial, technical, and policy support to the poorest developing countries like Ethiopia. On the other hand, IBRD helps middle income and credit-worthy poor countries.
IDA mainly gives three kinds of support to the poorest states: grants, zero to low-interest loans, and policy advice.
Thus, according to the World Bank’s recent statement, the financial support approved to Ethiopia is a 300 million dollars grant via the IDA, one of the two institutions of the Bank.
However, HaqCheck observed claims across the Ethiopian social media milieu that the financial provision is a loan. Some also said it is a grant. They seemed to use the two terms interchangeably.
What is the difference between grant and loan?
Merriam Webster dictionary defines grant as a sum of money or gift given by one entity to another for a particular purpose. And defines loan as an amount of money a lender gives to a borrower for temporary use and usually at interest. A loan is repayable while grants are given with no supposition of repayment.
According to the World Bank, IDA offers two types of financial assistance; concessional loans (credits) and grants. The loans are with zero or very low interest charges and are repayable in 30 to 40 years. The grants IDA provided to the poorest countries are assistance given with no future repayments.
Therefore, the recently approved support by the World Bank to Ethiopia was a GRANT, not a LOAN. The 300 million dollars IDA grant will be given to Ethiopia with no future repayment responsibility. It means that it is a gift.
Thus, HaqCheck confirmed that the World Bank’s recent financial support given to Ethiopia is a GRANT, not a LOAN, and rated the claims asserting it is a loan, FALSE.