China Eximbank provides RMB 633.6 million government concessional loan for Phase 3 of Addis Ababa Deep Wells Water Supply Project

Project narrative

On December 5, 2011, China Eximbank and the Government of Ethiopia signed an RMB 633,659,936 ($95,680,000 or ETB 1,718,140,345) government concessional loan (GCL) agreement [No. 1420303052011111536] for Phase 3 of the Addis Ababa Deep Wells Water Supply Project. The Ethiopian House of Representatives ratified the agreement on December 5, 2011. The proceeds of the loan were on-lent to Addis Ababa Water and Sewerage Authority (AAWSA). The borrowing terms of the GCL are as follows: a 2% interest rate, an 8.3-year grace period, and a 20.812-year maturity. The loan's first and last scheduled principal payment dates were March 21, 2020 and September 21, 2032, respectively. Its first and last scheduled interest payment dates were March 21, 2013 and September 21, 2032, respectively. According to the Government of Ethiopia’s Aid Management Platform (AMP), the loan achieved a 174% disbursement rate, with China Eximbank making 7 loan disbursements (worth ETB 2,988,235,879) between 2013 and 2015: an ETB 548,151,920 disbursement on January 8, 2013, an ETB 366,666,667 disbursement on January 8, 2014, an ETB 366,666,667 disbursement on January 8, 2014, an ETB 314,960,630 disbursement on July 8, 2014, an ETB 540,000,000 disbursement on October 8, 2014, an ETB 606,060,606 disbursement on January 8, 2015, and an ETB 245,729,390 disbursement on July 7, 2015. The purpose of the project was to drill 24 water wells -- including three deep water wells in the Akaki well field areas -- and produce about 10,000 cubic meters of water per a day, thereby benefiting 100,000 people. The project also included 266.3 km of main line installation, 10.5 km distribution line installation, and 25.8 km of collection lines. It also included construction of six water tankers that have the capacity of holding from 1,000 cubic meters of water to 5,000 cubic meters of water. The Akaki well field is located to the southeast of Akaki town about 22 km south of the center of Addis Ababa within the Akaki catchment. CGC Overseas Construction Co. Ltd, (CGCOC) was the EPC contractor responsible for project implementation. Its work was supervised by a local company called Water Works Design and Supervision. Project implementation commenced on November 19, 2012. A project completion ceremony was held on March 8, 2015. There are some indications that the China Eximbank loan for Phase 3 of the Addis Ababa Deep Wells Water Supply 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 Record 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.