ECONOMY

Ethiopia’s Loan Payment Extended For 30 Years By China

After talks between Ethiopian and Chinese officials at the recently concluded China-Africa summit, China has agreed to extend Ethiopia’s loan payments to 30 years. Ethiopian Prime Minister, Abiy Ahmed revealed this after briefing journalists on his return to Ethiopia on Thursday.

Abiy joined other African leaders at the triennial China-Africa summit that was held in Beijing last week. China pledged a new $60 billion loan to Africa during the summit, but not before it made updates to some of its existing loans on the continent.

“During our stay, we had the opportunity to enact limited restructuring of some of our loans. In particular, the loan for the Addis Ababa-Djibouti railway which was meant to be paid over 10 years has now been extended to 30 years. …Its maturity period has also been extended,” Abiy said.

Most notably of the infrastructural loan is the Addis Ababa-Djibouti railway line which was completed in 2016 by China Railway Group and China Civil Engineering Construction Corporation (CCECC), and jointly owned by Djibouti and the Ethiopian government. The 752.7 km railway is the first modern electrified railway line in East Africa. It is the only railway line that connects Ethiopia and Djibouti, a major entry point for cargos to landlocked Ethiopia.

Soon after Abiy Ahmed was appointed Prime Minister of Ethiopia, he signed a deal with Djibouti to secure a stake on its port for Ethiopian trade. Currently, Djibouti handles 95 percent of all trade inbound for Ethiopia. The railway train will enhance this trade, and along with Ethiopia’s recently signed deals for stakes in ports at Somaliland, Eritrea, Sudan, and Kenya, make it an investment hub in East Africa.

The loans also include the financing of two road projects and an upgrade of the electrical grid system of Ethiopia’s capital Addis-Ababa. The loan restructuring by China will allow Ethiopia’s Prime Minister Abiy Ahmed focus on implementing major developmental and political reforms in Ethiopia.

China’s decision to restructure its loans with Ethiopia might be seen as an anomaly, given that many analysts have claimed it is deliberately putting African countries in a ‘debt trap.’ Giving Ethiopia 30 more years to pay up its debts, like a loan shark extending loan payment, does not appear to be a trap for Ethiopia in the near future. However, with rumours that Zambia could be the first African victim of China’s debt-trap, perhaps, Chinese loans are more about the potential of the countries receiving them than the country giving it out.

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