China Eximbank provides $102.7 million buyer's credit loan for Qality Ring Road Interchange Tulu Dimtu Roundabout Road and Qality Ring Road Bulbula-Qilinto Roundabout Road Project

Project narrative

On October 4, 2016, China Eximbank and the Government of Ethiopia signed a $102,736,147.53 (ETB 2,286,586,782) buyer’s credit loan agreement [Contract No. BLAETH2016001] for the Qality Ring Road Interchange Tulu Dimtu Roundabout Road and Qality Ring Road Bulbula-Qilinto Roundabout Road Project. The Ethiopian House of Representatives ratified the loan under Proclamation No.988/2017 on December 27, 2016 and the proclamation went into effect on January 3, 2017. The loan, which is backed by a Sinosure credit insurance policy, was on-lent to Addis Ababa Roads Authority (AACRA). It carries the following borrowing terms: a 8.36% interest rate, a 15.309 year maturity, a 6.302 year grace period, a 0.5% management fee, and a 0.5% commitment fee. The loan's first and last scheduled principal payment dates were January 21, 2023 and January 21, 2032, respectively. Its first and last scheduled interest payment dates were July 21, 2018 and January 21, 2032, respectively. The borrower is expected to use the loan proceeds to finance approximately 50% of the total cost of a ETB 4,168,889,036.14 commercial (EPC) contract between AACRA and China Communications Construction Company (CCCC). The remainder of the commercial contract cost is expected to be directly financed from the budget of City Administration of Addis Ababa. According to the Government of Ethiopia’s Aid Management Platform (AMP), the $102,736,147.53 (ETB 2,286,586,782) loan achieved a 38% disbursement rate, with China Eximbank making a single disbursement of ETB 861,595,457 on March 28, 2018. The purpose of this project is support the construction of two subsidiary projects (‘Lot 1’ and ‘Lot 2’). Lot 1 involves the construction of the 11 km Qality-Tulu Dimtu Ring Road Interchange (also known as the Kality Ring Road Interchange - Tulu Dimtu Roundabout and the Qality Ring Road Interchange-Tulu Dimtu Ring Road), which is located on the outskirts of Addis Ababa. Lot 1 also involves the construction of five bridges as well as the Akaki Bridge. Lot 2 involves the construction of the 10.6 km Qality Ring Road to Qilinto Road (also known as the Kality Ring Road - Kilinto Roundabout and Bole Bulbula project and the Qality ring road to Qilinto road project). Lot 2 will connect Bole Michael ring road and Qality ring road and thereby provide for easy transportation route for the goods from the Qilinto industrial zone. This road segment is also expected to be useful for the condominium residents in the area. Lot 2 also involves the construction of a 250 meter-span bridge as well as an underpass bridge. Since both road segments (Lots 1 and 2) are located in areas that are important for trade, they are expected to improve market access for small businesses and industrial parks. IFH Engineering plc — a wholly owned subsidiary of the CCCC — is the general EPC contractor responsible for project implementation and its work is being overseen by AACRA. ASER Construction also worked as a subcontractor for CCCC. Engineer Zewdie Eskinder and Company Plc. is responsible for providing consulting services for Lot 1. Hake Consultant Company is responsible for providing consulting services for Lot 2. A groundbreaking ceremony for Lot 1 and Lot 2 took place on February 14, 2017. As of April 2021, Lot 1 had achieved a 76% completion rate. However, project implementation slowed after China Eximbank suspended loan disbursements in August 2021. By January 2024, the project as a whole (Lots 1 and 2) had achieved a 90% completion rate. However, this project has faced local scrutiny and criticism due to the fact that it was reportedly among the most expensive road projects to ever be undertaken (in unit cost terms) in Ethiopia. Lot 1 costs ETB 222.7 million per kilometer of road and Lot 2 costs ETB 219.8 million per kilometer of road. There are also indications that the China Eximbank loan for the Qality Ring Road Interchange Tulu Dimtu Roundabout Road and Qality Ring Road Bulbula-Qilinto Roundabout Road Project has 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 (including the Qality Ring Road Interchange Tulu Dimtu Roundabout Road and Qality Ring Road Bulbula-Qilinto Roundabout Road 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.