China Exim Bank Withholds $339m in Loans Amid Debt Reworks (Addis Fortune)
The Export-Import Bank of China has withheld the disbursement of 339 million dollars in loans to Ethiopia as it conducts a review of the country's debt standing, leading to delays in eight infrastructure projects, sources disclosed to Fortune.
The Chinese Bank has made such a move after the Ethiopian government took the offer to become one of the 73 countries eligible to re-negotiate payment of loans under an international initiative multilateral finance institutions took on debt servicing and suspension due to the COVID-19 pandemic. It is an initiative later endorsed by G20 and Paris Club countries.
The amount withheld accounts for a third of debt disbursed by the end of the third quarter of the just-ended fiscal year.
The loan disbursement was halted as negotiations are underway with the Bank for a debt extension of five years with a one-year grace period, Demisu Lemma, director of Chinese Cooperation at the Ministry of Finance, disclosed to Fortune.
This, however, will not bode well for Ethiopia; a potential failure to renegotiate its debt owed to major creditors, particularly China, will lead to the expiration of an indispensable program with the International Monetary Fund (IMF). The IMF approved in December 2019 three billion dollars in loans for Ethiopia to help its address foreign exchange shortages, reduce debt vulnerabilities and enhance domestic revenues mobilisations. Nonetheless, "maintaining sustainable debt levels" is a condition Ethiopia's negotiators have agreed to when accepting a loan that represents 700pc larger than its quote in special drawing rights.
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