China Eximbank provides $186.7 million preferential buyer's credit for Dire Dawa-Dewalle Toll Road Project

On May 4, 2014, China Eximbank and the Government of Ethiopia signed a $186,758,091.53 preferential buyer credit (PBC) loan agreement [CHINA EXIMBANK PBC No. (2014) 03 Total No. (297) No. 1420303052013211786] with China Eximbank for the Dire Dawa-Dewalle Toll Road Project. The Ethiopian the House of Representatives ratified the PBC agreement under Proclamation no. 854/2014 on June 24, 2014. The borrowing terms of the PBC were as follows: a 2% interest rate, a 6 year grace period, and a maturity of 20 years. The borrower was expected to use the proceeds of the PBC to finance 85% of the cost of a $216,530,065.53 (ETB 3,986,318,506.35) commercial (EPC) contract between the Ethiopian Roads Authority (ERA) and China Geo-engineering Construction Overseas Company Group (CGCOC), which was signed on March 5, 2013. The ERA was responsible for directly funding 15% (ETB 597,947,775.95 or $32,479,509.829) of the commercial contract cost. According to the Government of Ethiopia’s Aid Management Platform (AMP), the ETB 3,824,329,330 China Eximbank loan achieved a 92% disbursement rate, with China Eximbank making 13 loan disbursements (worth ETB 3,504,749,269) between 2014 and 2019: an ETB 1,127,312,414 disbursement on December 5, 2014, an ETB 134,979,543 disbursement on September 22, 2015, an ETB 232,092,985 disbursement on January 27, 2016, an ETB 278,697,350 disbursement on March 22, 2016, an ETB 201,034,192 disbursement on June 28, 2016, an ETB 243,047,849 disbursement on November 17, 2016, an ETB 41,534,408 disbursement on February 9, 2017, an ETB 51,830,494 disbursement on May 10, 2017, an ETB 321,959,701 disbursement on June 20, 2017, an ETB 271,887,740 disbursement on September 25, 2017, an ETB 100,050,872 disbursement on February 1, 2018, an ETB 86,890,755 disbursement on April 27, 2018, and an ETB 413,430,966 disbursement on November 28, 2019. The purpose of the project was to construct a 220 km toll road from Dire Dawa (Diredawa) to Dewalle (Dawale). The road was constructed according to the following standard: 7 meters wide and 5 cm thick single layer of asphalt concrete, with 2 by 1.5m at the highway shoulder. CGCOC was the general EPC contract responsible for project implementation. Shandong Great Supervision and Consultation Co., Ltd. provided the consulting services for the project. The project commenced in October 2014. It was completed in December 2018. The road was officially inaugurated on June 18, 2019. Upon completion, the toll road was officially transferred to the Ethiopian Toll Roads Enterprises. The completion of the project has reportedly reduced the travel time from Dire Dawa city to the Djibouti border from 10 hours to 4 hours. However, according to an October 2021 report, '[t]hus far, there is not much traffic on the road, which leads through the desert and has almost no services or other urban settlements along it. This highway could become financially viable by providing a faster link between Addis Ababa and Djibouti, but only when the missing sections between AdamaAwash-Mieso-Dire Dawa are built. While the AfDB and the WB are preparing financing for some of these missing sections, Chinese financing of the Dire Dawa-Dewele section was premature.’ To access the toll road, truck drivers are required to pay ETB 200 ($7); mid-size trucks are required to pay ETB 150; and automobile drivers are required to pay ETB 100. As of late 2021, there was no data available on the amount of toll revenue generated by the road. There are some indications that the China Eximbank loan for the Dire Dawa-Dewalle Toll Road 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. Dire Dawa-Dewalle is also spelled Dire Dawa-Dewele and Diredawa-Dawale in source materials. 2. One source identifies the grace period as 7 years rather than 6 years. 3. This project is also known as the Dire Dawa-Dawale Road Project. The Chinese project title is 埃塞俄比亚DIRE DAWA-DEWELLE公路项目. 4. The system identification number for this project in the Government of Ethiopia’s Aid Management Platform (AMP) is 87143359109028. Two different loan commitment values are reported in the AMP: ETB 3,986,318,506.35 and ETB 3,824,329,330. The discrepancy is likely due to exchange rate differences.

Number of official sources

9

Number of total sources

22