Ethiopia is a landlocked country with a population of about 101,500,000 people, of which about 80% of whom live in rural areas. The Ethiopian economy has grown rapidly in the last decade primarily as a result of increased agricultural production. The agricultural sector accounts for more than 80% of total employment and 45% of the country's GDP. Farming is undertaken mainly by small-scale rural farmers whose activities are often unsustainable. This is because farmers are forced to cultivate land and graze livestock on steep slopes with fragile soils in order to meet daily food needs. The watersheds in such mountainous land are further mismanaged through overharvesting of trees for fuel wood. As a result of these factors – as well as intense and infrequent rains – topsoil erosion and land degradation are widespread across the Ethiopian highlands.Climate change in Ethiopia – which includes rising temperatures, more intense rain events, greater variability of mean annual rainfall and a greater frequency of droughts and floods – has greatly intensified the degradation of farmland and watersheds in Ethiopia. All of these climate change effects contribute to a negative cycle of: 1) reduced soil organic matter (with concomitant reductions in nutrient availability and water infiltrability); 2) greater runoff of rainwater; 3) increased rates of soil erosion; and 4) reduced agricultural productivity. Average national temperatures have increased by 1.3°C between 1960 and 2006, and rainfall during the short rainfall season is increasingly variable on both a spatial and temporal scale. Furthermore, climate models show that the intensity and frequency of droughts and floods are likely to increase markedly over the next 50 years.Local communities in the Ethiopian highlands are increasingly vulnerable to the above climate change effects. Their agricultural productivity is being greatly impeded in particular by increased rainfall variability, droughts, floods, soil erosion and by limited availability of surface and groundwater for irrigation and drinking needs. Stream flows are decreasing, groundwater levels are declining, mountain springs are drying up and their lakes are increasingly being silted up. Certain crops that were being grown in the past are no longer able to be farmed. Predicted future climate change will further exacerbate their vulnerability to climate change.To increase the climate resilience of local communities in the Ethiopian highlands, the proposed LDCF project will: 1) integrate climate change risk adaptation measures into federal, regional and Woreda-level development planning, budgeting and execution; 2) improve the availability of climate information products; 3) undertake climate-smart integrated watershed management for improved rainwater harvesting and retention; 4) introduce climate-smart agricultural practices; and 5) diversify livelihoods. This will be achieved through three complementary components that focus, respectively, on capacity development, provision of climate risk information and investments in climate-smart land management. The Ministry of Environment, Forest and Climate Change (MEFCC) will implement the project over a five-year period across four regions and in eight Woredas.