China Eximbank provides RMB 172 million government concessional loan for Supply of the Container/Vehicle Inspection Systems Project

On May 24, 2010, China Eximbank and the Government of Ethiopia signed an RMB 172 million ($25.1 million) government concessional loan (GCL) agreement [CHINA EXIMBANK GCL No. 2010 (28)] for the Supply of the Container/Vehicle Inspection Systems Project. The loan agreement was ratified by the Ethiopian House of Representatives in July 2010. The loan carried the following borrowing terms: an interest rate of 2%, an 8-year grace period, and a maturity of 20 years. The borrower was expected to use the proceeds of the loan to finance a commercial (EPC) contract with Nuctech Company, Ltd. According to the Government of Ethiopia’s Aid Management Platform (AMP), the RMB 172 million (ETB 319,880,975) loan achieved a 50% disbursement rate, with China Eximbank making 3 loan disbursements (worth ETB 158,564,244) between 2011 and 2013: an ETB 121,990,816 disbursement on July 7, 2011, an ETB 31,427,788 disbursement on January 8, 2013, and an ETB 5,145,640 disbursement on April 8, 2013. The purpose of the project was to help the Ethiopian Revenue and Customs Authority procure 51 pieces of customs inspection equipment for scanning imported containers and vehicles. Nuctech Company, Ltd. was the EPC contractor responsible for project implementation. The implementation of the project commenced in December 2010 when the first batch of equipment deliveries arrived in Ethiopia. According to the Government of Ethiopia’s AMP, the project reached completion on January 11, 2013. There are some indications that the China Eximbank loan for the Supply of the Container/Vehicle Inspection Systems Project may have financially underperformed vis-a-vis the original expectations of the lender. According to the Government of Ethiopia’s Aid Management Platform, as of September 2019, ICBC suspended about $67 million worth of loan disbursements 'due to [the] cross-default situation of the country’ (see Project ID#58616). Then, in August 2021, China Eximbank withheld $339 million loan disbursements for 12 projects and halted project implementation due to Government of Ethiopia’s rapidly dwindling foreign exchange reserves and debt sustainability challenges. Demisu Lemma, the Director of Chinese Cooperation at the Ethiopian Ministry of Finance, noted at the time that the Ethiopian Government was in discussions with China Eximbank about a potential debt rescheduling (that would involved a 5-year maturity extension and a 1-year grace period extension). Then, after considerable delay, the G20 Common Framework (CF) creditor committee for Ethiopia convened in September 2021, with the French Government and the Chinese Government serving as co-chairs. The CF debt rescheduling talks were still ongoing in mid-2023.

Additional details

1. The database of Chinese loan commitments that SAIS-CARI released in July 2020 and rereleased in 2021 does not record the borrowing terms (interest rate, grace period, maturity) of this loan. AidData relies on the borrowing terms that are recorded in the Ethiopian Ministry of Finance and Economic Development's Public Sector Debt Statistical Bulletin No. 5. 2. The system identification number for the project in the Government of Ethiopia’s Aid Management Platform (AMP) is 8714327100827. 3. Nuctech Company, Ltd is a Chinese partially state-owned security inspection products company, headquartered in Beijing, created in 1997 as an offshoot of Tsinghua University. 4. This project is also known as the Container/Vehicle Inspection Systems Project.”

Number of official sources

6

Number of total sources

18