Train crosses the Holhol bridge, Djibouti, part of the new railway to Addis Ababa, Ethiopia (Skilla1st/Creative Commons)

Indebted Ethiopia gets major break on Chinese loan for Djibouti railway

12 September 2018 | By GCR staff 0 Comments

China has given Ethiopia 20 extra years to pay back a loan for its transformative railway to Djibouti as concerns over the African country’s debt load grow.

The restructuring of the loan triples the time landlocked Ethiopia has to repay what it owes for the $4bn, 750km standard gauge line to the port of Djibouti, which opened in January last year. The original terms stipulated 10 years.

China’s Export-Import Bank loaned Ethiopia some 70% of the total project cost, reports Reuters.

Ethiopia’s prime minister Abiy Ahmed announced the welcome news last week after returning from the 7th Forum on China-Africa Cooperation summit in Beijing.

China is a major lender to Ethiopia, but it has voiced concerns over the country’s rising debt.

In July China’s mission to the African Union in Addis Ababa said on its website that creditors were worried about repayment risks as Ethiopia’s debt reached 59% of GDP, Reuters reported earlier.

“During our stay, we had the opportunity to enact limited restructuring of some of our loans,” Abiy said. “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.”

In a further sign of China’s new caution over infrastructure debt in Africa, Beijing declined to commit to a $190m grant for a section of Kenya’s new cross-country railway, asking for a comprehensive feasibility study first.

Photograph: Train crosses the Holhol bridge, Djibouti, part of the new railway to Addis Ababa, Ethiopia (Skilla1st/Creative Commons)