Narrative
Full Description
Project narrative
In November 2006, China Eximbank and the Government of Ethiopia’s Ministry of Finance and Economic Development signed a $500 million buyer’s credit facility agreement (互惠贷款) — also known as a master loan framework agreement and a master facility agreement — for an unspecified set of development projects. All subsidiary loans approved under the buyer’s credit facility agreement (captured via Record ID#45047) carried the following borrowing terms: a 13-year maturity, a 4-year grace period, and an interest rate of LIBOR plus a 2-3% margin. All of the subsidiary loans were secured with (i.e., collateralized against) Ethiopia's export receipts to China, which at the time primarily consisted of sesame seed export receipts. The buyer’s credit facility agreement also required that all Ethiopian exports (export receipts) to China to be overseen by the Commercial Bank of Ethiopia (CBE), the country’s largest state-owned financial institution. As a source of collateral, the borrower was required to maintain a minimum cash balance in a debt service reserve account (DSRA) at the CBE. The cash balance of the DSRA (escrow account) was $284,368,041 as of June 30, 2011, $308,914,767 as of June 30, 2012, $300,000,000 as of June 30, 2016, $300,000,000 as of June 30, 2017, $300,000,000 (ETB 8,260,410,000) as of June 30, 2018, $300,000,000 as of June 30, 2019, ETB 10,599,600,000 as of June 30, 2020, ETB 8,058,726,059 as of June 30, 2021, ETB 10,722,750,953 as of June 30, 2022, and ETB 9,832,603,839 as of June 30, 2023. 16 subsidiary loans for 16 different projects were reportedly approved under the buyer’s credit facility agreement. 16 subsidiary loans for 16 different projects were reportedly approved under the buyer’s credit facility agreement. China Eximbank, CBE, and the Government of Ethiopia signed a subsidiary buyer’s credit loan worth approximately ETB 213,216,749 ($23,136,132.51) for the Finchaa-Ghedo-Gefersa I Substation Project on February 24, 2008. The loan's first and last scheduled principal payment dates were December 31, 2011 and March 31, 2021, respectively. Its first and last scheduled interest payment dates were July 1, 2009 and March 31, 2021, respectively. The project involved the construction of substations along the following transmission lines: a 67 km, 230 kV transmission line from the Fincha’a-1 (Fincahaa-1) substation to the Ghedo substation, a 134 km, 230 kV transmission line from the Ghedo substation to the Gefersa substation, a 12 km, 230 kV transmission line from the Fincha'a-2 (Fincahaa-2) substation to branching point on the Fincha'a-I -Ghedo line, and a 29 km, 230 kV transmission line from the Neshe hydroelectric power plant (HEPP) to new Fincha'a-II substation. The project was completed and put into operation in 2011.
Staff comments
1. AidData has estimated the loan's all-in interest rate -- at the time it was issued -- by adding 2.5% (the midpoint between a 2% and 3% margin) to average 6-month LIBOR rate in February 2008 (3.00393%). 2. This buyer's credit loan from China Eximbank is not included in the database of Chinese loan commitments that SAIS-CARI released in 2020 and re-released in 2021. Nor is it included it in the China’s Overseas Development Finance Dataset that Boston University's Global Development Policy Center published in December 2020. 3. According to CBE's financial statements for the year ending on June 30, 2012 (https://www.combanketh.et/cbeapi/uploads/2011_12_2037357399.pdf), 'CBE is the administrator of the total loan of USD 499,222,780, granted by EXIM Bank of China to the Ethiopian Electric Power Corporation (EEPCO) and Muger Cement Enterprise (MCE). The said loans are repayable by EEPCO and MCE to CBE in Birr over a period of ten years.' 4. The loan identification number in the Government of Ethiopia’s Debt Management and Financial Analysis System (DMFAS) is 20776011 and the corresponding project name in DMFAS is ‘FINCHA-GEDO-GEFERSA I SUBSTATI’. See https://www.dropbox.com/scl/fi/7nrczfanixvivmiyzqx3i/MOFED-Loan-Level-Data-on-Borrowing-Terms-and-Loan-Performance-September-2024_OTHER_PUBLIC.xlsx?rlkey=5sqhh9ii4t3x8cmz0jf6s7cod&dl=0 5. As of September 2024, the Government of Ethiopia recorded the loan's all-in interest rate as 2% in DMFAS (see https://www.dropbox.com/scl/fi/7nrczfanixvivmiyzqx3i/MOFED-Loan-Level-Data-on-Borrowing-Terms-and-Loan-Performance-September-2024_OTHER_PUBLIC.xlsx?rlkey=5sqhh9ii4t3x8cmz0jf6s7cod&dl=0), which suggests the possibility of a debt rescheduling involving an interest rate reduction. This issue warrants further investigation. 6. This China Eximbank loan was not included in the database of Chinese loan commitments that SAIS-CARI released in 2020 and re-released in 2021. Nor was it included it in the Chinese Loans to Africa (CLA) Database — that is maintained by Boston University's Global Development Policy Center — as of August 2024. 7. A separate China Eximbank loan for the FGG-2 230kV Finchaa-Ghedo-Gefersa II Power Transmission Project is captured via Record ID#92182.