Date: Monday, 01 April 2019
Prime Minister Abiy Ahmed is in the midst of renegotiating Ethiopia's relationship with China due to the debt burden created by previous governments.
Last September, Prime Minister Abiy told reporters in Addis Ababa that China had agreed to restructure the repayment period for some of its loans from 10 to 30 years. He had just arrived from the Forum on China-Africa Cooperation summit, where China’s President Xi Jinping pledged $60bn for development in Africa while warning against “vanity projects”.
In February 2019, Prime Minister Abiy told parliament that his government has successfully renegotiated the repayment period for 60% of its external debt, which currently stands at over $26bn.
Ethiopia needs this debt relief, as it works to reform its political system while stabilising and growing its economy. At the moment, imports far outrank exports by as much as 400%, while government debt stands at 59% of its gross domestic product. About half of its external debt is owed to China, which has invested in several massive projects in the country.
In August 2018, Chinese paper Xinhua reported that Ethiopia had licensed 1,294 Chinese investments in the 2017/8 financial year out of a total of 5,217 investment projects. There are about 400 Chinese investment projects valued at more than $4bn already in full operation in Ethiopia. A good number of this are based within industrial parks and the real estate sector.
Some Chinese companies, such as China Gezhouba Group Co., are working to complete already existing projects such as the Grand Renaissance Dam. China has a deep interest in the completion of the dam, not just to support the electrified railway but also because it gave Ethiopia a $1.2bn loan to build 400kV and 500kV transmission lines in 2013.