China Eximbank provides RMB 923.7 million government concessional loan for Addis Ababa Gerbi Dam Reservoir, Transmission Line and Treatment Plant Project

Project narrative

On December 27, 2016, China Eximbank and the Government of Ethiopia signed an RMB 923,712,744.71 (ETB 3,033,036,171) government concessional loan (GCL) agreement [CHINA EXIMBANK GCL No. (2016) 19 TOTAL NO. (589) 1420303052016111861] for the Addis Ababa Gerbi Dam Reservoir, Transmission Line and Treatment Plant Project. The Ethiopian House of Representatives ratified the agreement on February 7, 2017. The proceeds of the loan were on-lent to Addis Ababa Water and Sewerage Authority (AAWSA). The loan carries the following borrowing terms: a 19.75 year maturity, an 7.74 year grace period, and a 2% interest rate. The loan's first and last scheduled principal payment dates were September 21, 2024 and September 21, 2036, respectively. Its first and last scheduled interest payment dates were March 21, 2020 and September 21, 2036, respectively. According to the Government of Ethiopia’s Aid Management Platform (AMP), the loan achieved a 39% disbursement rate, with China Eximbank making a single loan disbursement (worth ETB 1,185,030,917) on November 11, 2019. The project involves the construction of a dam across the Gerbi River in Oromia Regional State of Ethiopia. More specifically, it involves the construction of a reservoir, pumping station, underground pipelines, barrage, canals, distribution system, iron gates and related facilities. China Gezhouba Group Company Limited (CGGC) is the contractor responsible for project implementation. Construction had still not commenced by early 2023. However, in March 2023, Ethiopia's Finance Minister announced that China Eximbank had agreed to release loan disbursements worth $622 million for 14 projects, including the Addis Ababa Gerbi Dam Reservoir, Transmission Line and Treatment Plant Project. There are some indications that the China Eximbank loan for the Addis Ababa Gerbi Dam Reservoir, Transmission Line and Treatment Plant 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.