Addis Abeba — Ethiopian Finance Minister Ahmed Shede led a delegation that recently held a crucial meeting with Wu Fulin, Chairman of the China Export-Import Bank. The objective of their discussion was to address the withheld loan disbursement totaling $1.3 billion by Chinese financial institutions and the federal government.
On 19 October, 2023, the Ministry of Finance announced that the delegation's efforts have garnered a positive response from the executives of China Exim Bank during a meeting held on the sidelines of the Third Belt and Road Forum, which took place from 17-18 October, 2023.
Currently, financial institutions including China Exim Bank, China Development Bank and the Industrial and Construction Bank of China have suspended the disbursement of loans totaling over $758 million while the Chinese government evaluates Ethiopia's debt status. The Chinese government is also withholding an additional $576 million, as detailed in the Ministry of Finance's June 2023 Public Sector Debt Statistical Bulletin.
The loan is expected to be disbursed after the Chinese government concludes its analysis of Ethiopia's total debt. Ethiopia submitted the required documents for the debt assessment three years ago and has been eagerly anticipating a response from Chinese financial institutions and the government since then.
The Ministry of Finance has stated that the two parties have engaged in discussions regarding the negotiation of Ethiopia's debt restructuring with the Chinese government.
The decision of the Chinese state-owned banks to withhold loan disbursement has caused significant delays in Ethiopia's infrastructure development, impacting at least eight major projects.
One project affected by the freezing of funds is the 10-kilometer-long Kality to Tulu Dimtu highway. China Exim Bank had initially approved $103 million in loans to contribute to the project's costs, but disbursement abruptly halted in 2021. After over a year of suspension, the construction of the highway finally commenced due to the allocation of 267 million birr for the project by the Addis Ababa city administration nearly two years ago.
Chinese banks did not disburse any loans to Ethiopia in the years 2021 and 2022. However, in the current year, they have disbursed a mere $26 million. However, President Xi Jinping announced recently that China would provide Ethiopia with one year of debt service relief.
On the sidelines of the Third Belt and Road Forum, the Ethiopian delegation also had the opportunity to meet with senior managers of the China Development Bank, another major financier of infrastructure projects in Ethiopia.
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Accompanied by top government officials, Prime Minister Abiy Ahmed arrived in Beijing, China, on 16 October, 2023, to participate in the two-day Belt and Road Forum. Following his arrival, Ethiopia and China announced the advancement of their existing bilateral relations to an "all-weather strategic cooperation partnership."
Prime Minister Abiy engaged in discussions with his Chinese counterparts, President Xi Jinping and Prime Minister Li Qiang. He also oversaw the signing of 12 cooperation agreements between Ethiopia and China.
Currently, Ethiopian authorities are also engaged in discussions with the creditors' committee under the Group of 20's Common Framework. Unfortunately, progress has been impeded by a civil war that broke out in November 2020 and has continued for two years. Ongoing discussions with development partners, mainly the Bretton Woods institutions, are still underway.
The IMF, World Bank, and Paris Club countries collectively make up 75% of Ethiopia's total external debt, which amounts to $28 billion.
