Project ID: 48766

China Eximbank provides $171.08 million preferential buyer's credit for Arsi Negele-Hawassa Section of the Modjo Hawassa Highway Construction Project

Commitment amount

$ 197142472.838411

Adjusted commitment amount

$ 197142472.84

Constant 2021 USD

Summary

Funding agency [Type]

Export-Import Bank of China (China Eximbank) [State-owned Policy Bank]

Recipient

Ethiopia

Sector

Transport and storage (Code: 210)

Flow type

Loan

Level of public liability

Central government debt

Infrastructure

Yes

Category

Intent

Mixed (The next section lists the possible statuses.)

Commercial

Development

Representational

Mixed

Financial Flow Classification

OOF-like (The next section lists the possible statuses.)

Official Development Assistance

Other Official Flows

Vague (Official Finance)

Flows categorized based on OECD-DAC guidelines

Project lifecycle

Status

Implementation (The next section lists the possible statuses.)

Pledge

Commitment

Implementation

Completion

Suspended

Cancelled

Milestones

Commitment

2017-05-12

Actual start

2017-01-01

Geography

Description

On May 12, 2017, China Eximbank and the Government of Ethiopia signed a $171,080,400 preferential buyer’s credit (PBC) agreement [CHINA EXIMBANK PBC NO. 2017 (15) TOTAL NO. (441)] for the Arsi Negele Hawassa Section (Lot 4) of the Modjo Hawassa Highway Construction Project. The Ethiopian House of Representatives ratified the loan agreement on July 5, 2017 under Proclamation No.1043/2017. The proclamation entered into force on September 8, 2017. The borrower was expected to use the loan proceeds to partially finance a $196 million commercial (EPC) contract between the Ethiopian Roads Authority (ERA) and China Railway Seventh Group Co. Ltd (CRSG). According to official correspondence between the Concessional Loan Department of China Eximbank and the State Minister of Finance of Ethiopia (on December 25, 2019), China Eximbank made an initial loan disbursement worth $37,015,814.73 (as part of an advance payment and progress payment) on December 25, 2019. This overall loan disbursement rate was of December 25, 2019 was 21.6%. As of April 2022, no additional loan disbursements were recorded in the Government of Ethiopia’s Aid Management Platform (AMP). The purpose of the $700 million Modjo-Hawassa Highway Construction Project is to construct a 203 km expressway between the cities of Mojo and Hawassa with two carriageways, each with two 3.65-meter-wide lanes and paved outer and inner shoulders, grade separated junctions, a 9-meter wide median, and 31 local crossings for animals and pedestrians. The project is specifically tied to an effort to develop a flagship industrial park in the city of Hawassa called the Hawassa Industrial Park (HIP). The Modjo Hawassa Highway Construction Project is being financed and implemented in 4 lots. Lot 1 is a 57 km Modjo-Meki section of the highway that is being financed by the African Development Bank and the Government of Ethiopia (and implemented by CREC). Lot 2 is a 37 km Meki-Batu Ziway section of the highway that is being financed by Korea Eximbank and the Government of Ethiopia. Lot 3 is a 55 km Batu Ziway-Arsi Negele section of the highway that is being financed by the World Bank. Lot 4 is a 51.68 km Arsi Negele-Hawassa section of the highway being financed by China Eximbank. CRSG is the EPC contractor responsible for Lot 4 implementation. Lots 1 and 2 were inaugurated in May 2021. However, the infrastructure for toll services remained unfinished as of late 2021. Lot 4 entered implementation in 2017. However, as of October 2019, it had only achieved a 4% completion rate. Lot 4 encountered major implementation problems and delays. China Eximbank withheld loan disbursements and halted project implementation in August 2021. However, in the absence of China Eximbank financing, the Ethiopian Government reportedly continued to finance the implementation of Lot 4. There are some indications that the China Eximbank loan for the Arsi Negele-Hawassa Section of the Modjo Hawassa Highway Construction 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 (including the Arsi Negele-Hawassa Section of the Modjo Hawassa Highway Construction Project) 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. This project is also known as the Modjo-Hawassa Highway (Arsi Negele-Hawassa Section) Project and the 4th section of the Modjo Hawassa Highway Project. The Chinese project title is 莫焦-阿瓦萨高速公路第4标段. 2. The World Bank is subjecting this project to a rigorous impact evaluation through its DIME initiative. 3. The system identification number for this project in the Government of Ethiopia’s Aid Management Platform (AMP) is 87143436113599. 4. The AMP records the loan commitment value as ETB 3,936,650,580 monetary value of the December 2019 loan disbursement as ETB 1,169,772,770. 5. According to China Eximbank, this project is the first project that it is co-financing along with the World Bank and the Africa Development Bank. 6. According to an October 2021 report, '[i]n this case, China’s [export credit agencies] do not appear to have been in the lead. Rather, the project seems to have been led by the AfDB and the World Bank, with China [Eximbank] coming in to finance a segment.' 7. Some sources refer to the EPC contractor as China Railway Engineering Corporation (CREC); other sources refer to the EPC contractor as CRSG.

Number of official sources

16

Number of total sources

28

Download the dataset

Details

Cofinanced

Yes

Cofinancing agencies [Type]

World Bank [Intergovernmental Organization]

African Development Bank (AfDB) (ADB) (BAD) [Intergovernmental Organization]

Export-Import Bank of Korea (KEXIM) [State-owned Bank]

Direct receiving agencies [Type]

Government of Ethiopia [Government Agency]

Implementing agencies [Type]

Government of Ethiopia [Government Agency]

China Railway Engineering Corporation 7th Bureau (CREC7) [State-owned Company]

Loan Details

Bilateral loan

Export buyer's credit

Investment project loan

Preferential Buyer's Credit