Fortune News | Aug 09,2025
May 11 , 2019
The recent high-level delegation visit led by Prime Minister Abiy Ahmed (PhD) to China was hailed as a success. The official media and social media platforms run by the Prime Minister’s Office were quick to report a high scorecard. Indeed, there has been ambiguity to what exactly has been gained from the visit, except that a Chinese firm has signed a deal to erect a 1.8-billion-dollar electric transmission line, of course, paid by loans from China.
This will no doubt help China consolidate its hold on Ethiopia’s economy, inflating its loan size somewhere in the neighbourhood of 18 billion dollars, comprising two-thirds of the latter’s external debt exposure, gossip claims. Already, Ethiopia’s commitment to service its foreign debt has climbed to around 1.6 billion dollars a year. What happens when countries default on their loans to China is visible considering what happened in Sri Lanka, an Asian country forced to surrender a controlling stake in its company that runs a port in Hambantota, where China also took a 99-year lease right.
Ethiopia has its share of fat loans it took from China to pay for the construction of vital public infrastructure. The Addis Abeba Light Railway consumed 475 million dollars, of which 85pc came from the Chinese Ex-Im Bank. The Ethiopia-Djibouti Railway took four billion dollars in investment, but already a Chinese insurance firm, Sinosure, claims losses of one billion dollars due to terrible design and project planning.
It is apparent to policymakers in both countries that this project will fail to generate revenues to pay back the loans in time to avoid the repeat of Hambantota. To his credit, Abiy has had a modest success during his first visit to Beijing last year in persuading Chinese authorities to extend the loan repayment period for the cross border railway project from 10 years to 30 years.
He had hoped he would be as lucky this time around in convincing the Chinese to restructure a large share of the loans his country owes them. Judging the result by his administration’s initial desire, the outcome is nowhere close to being pronounced a success. In fact, it is far from it, claims gossip.
The much-celebrated agreement from China to cancel the interest its loans bear over Ethiopia’s debt could not be taken as more than a gesture of good intentions, gossip claims. The stock of interest Ethiopia needs to pay on its total external loans may not exceed half a billion dollars; thus the amount that goes to China may not exceed 300 million dollars if calculated generously, according to gossip. Gaining such a concession may mean something, but it is not a breakthrough as the administration celebrated it, claims gossip.
Nonetheless, the Prime Minister’s visit was not in vain, according to gossip. He has received pledges from the Chinese authorities to put additional resources toward addressing the nightmarish consequences of the poorly designed railway project in Addis Abeba, gossip disclosed. The Chinese might have also agreed to extend loans for the completion of many of the sugar estates under construction, claims gossip. And they have decided to design and build 12Km of the 56Km riverside development in Addis Abeba, where Chinese companies are the largest group of businesses who bought the five million Birr tickets for a “dine with the Prime Minister” event soon to be held, gossip says.
The most substantial contribution for this project, however, comes from the state-owned Commercial Bank of Ethiopia (CBE), whose executives decided to pledge half a billion Birr to be disbursed in three years, the planned lifetime of the project. This amount includes 10 tickets to be given to some of CBE’s board of directors and senior executive members, gossip disclosed.
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May 11,2019 [ VOL
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