The International Development Association (IDA) will lend Ethiopia $720m to improve road travel between Addis Ababa and Djibouti.

The IDA is the division of the World Bank that deals with very poor countries. It aims to improve the flow of goods and people between Addis and the microstate of Djibouti, Ethiopia’s main outlet to the Indian Ocean and world markets.

The World Bank says the initiative will be “a catalyst for commerce, assisting businesses to trim their overheads and strengthen linkages to regional and global value chains”.

Around 95% of Ethiopia’s external trade uses the Djibouti corridor. The project will see a 150km dirt road between Mieso and Dire Dawa become a four-lane highway. Currently, trucks can’t use this road and must follow a more circuitous route on the A10.

Other elements of the plan include logistics facilities, freight truck terminals, and secondary roads to connect towns and villages to the main corridor.

Ahmed Shide, Ethiopia’s finance minister, commented: “This project is important to support our commitment to fostering inclusive growth and regional integration, as we are now fully focused on sustaining the growth and reaping the peace dividends.”

Boutheina Guermazi, a World Bank director for regional integration, added that the programme was “one of the priority operations that we are supporting in the Horn to help connect hinterland to ports and markets, and to increase opportunities for regional trade”.