Narrative
Full Description
Project narrative
On May 15, 2013, China Eximbank and the Government of Ethiopia signed a $2,490,760,000 buyer’s credit loan (BCL) agreement for the Addis Ababa–Djibouti Railway Project. The BCL, which was on-lent to Ethiopian Railways Corporation (ERC), carried the following borrowing terms: a 15-year maturity, a 6-year grace period, and an interest rate of LIBOR plus a 3% margin. The loan was also backed by a credit insurance policy from China Export and Credit Insurance Corporation (SINOSURE). China Eximbank provided the loan in three separate loan tranches. The first tranche is worth $1,289,029,000 (captured via Record ID#70086) and it supported the Sebeta-Adama–Meiso Section of the Addis Ababa–Djibouti Railway Project. The second tranche is worth $981,260,000 (captured via Record ID#70085) and it supported the Meiso-Dewanle Section of the Addis Ababa–Djibouti Railway Project. The third tranche is worth $220,471,000 (captured via Record ID#70083) and it supported the Addis Ababa–Djibouti Railway Rolling Stock Supply Project. The borrower was expected to use the proceeds of the $1,289,029,000 China Eximbank loan tranche to finance 70% of the cost of a $1,841,470,000.00 commercial (EPC) contract between the Ethiopian Railway Corporation (ERC) and China Railway Engineering Corporation (CREC), which was signed on October 25, 2011 (and modified on November 5, 2012, February 7, 2013, and March 15, 2013) to support the construction of a 329 km Sebeta (Addis Ababa) to Miesso section of the railway. The borrower was expected to use the proceeds of the $981,260,000 China Eximbank loan to finance 70% of the cost of a $1,401,800,000 commercial (EPC) contract between the ERC and China Civil Engineering Construction Corporation (CCECC), which was signed on December 16, 2011 (and modified on November 2, 2012, February 7, 2013 and March 8, 2013) to support the construction of a 339 km section of the railway that runs from Miesso (Meiso) to Dewelle (Dewanle) on Ethiopia's border with Djibouti. The borrower was expected to use the proceeds of the $220,471,000 China Eximbank loan to finance approximately 85% of a $259 million commercial contract between China North Industries Corporation (NORINCO) and the ERC, which was signed in March 2013 to support the Addis Ababa–Djibouti Railway Rolling Stock Supply Project. Then, on or around September 4, 2018, China Eximbank and the Government of Ethiopia restructured the three buyer’s credit loan agreements for the Sebeta-Adama–Meiso Section of the Addis Ababa–Djibouti Railway Project, the Meiso-Dewanle Section of the Addis Ababa–Djibouti Railway Project, and the Addis Ababa–Djibouti Railway Rolling Stock Supply Project that were signed in May 2013. Under the terms of the restructuring agreements, the maturities of the loans were reportedly extended by an additional sixteen years (i.e., from 15 years to 31 years, or from 2028 to 2044). Additionally, the grace period of two of the loans were reportedly extended by 5 years, including the $1.28 billion China Eximbank buyer's credit loan and the $981 million China Eximbank buyer's credit loan (i.e., from 6 years to 11 years, or from 2019 to 2024). The the grace period of the third loan (the $220 million China Eximbank buyer's credit loan) was reportedly extended by an additional 6 years (i.e., from 6 years to 12 years, or from 2019 to 2025). The 2018 debt rescheduling record for the $1.28 billion China Eximbank buyer’s credit loan that supported the Sebeta-Adama–Meiso Section of the Addis Ababa–Djibouti Railway Project is captured via Record ID#96154. After the debt rescheduling agreement was finalized, the loan's first and last scheduled principal payment dates were reset to July 21, 2024 and January 21, 2044. Its first and last scheduled interest payment dates were reset to July 21, 2014 and January 21, 2044. The 2018 debt rescheduling record for the $981 million China Eximbank buyer’s credit loan that supported the Meiso-Dewanle Section of the Addis Ababa–Djibouti Railway Project is captured via Record ID#96155. After the debt rescheduling agreement was finalized, the loan's first and last scheduled principal payment dates were reset to July 21, 2024 and January 21, 2044. Its first and last scheduled interest payment dates were reset to July 21, 2014 and January 21, 2044. The 2018 debt rescheduling record for the $220 million China Eximbank buyer’s credit loan that supported the Addis Ababa–Djibouti Railway Rolling Stock Supply Project is captured via Record ID#61941. After the debt rescheduling agreement was finalized, the loan's first and last scheduled principal payment dates were reset to January 21, 2025 and July 21, 2044. Its first and last scheduled interest payment dates were reset to January 21, 2015 and January 21, 2044.
Staff comments
1. According to The Indian Ocean Newsletter, the debt restructuring was done in exchange for 40% of the shares in the Ethiopian public company Ethiopian Shipping and Logistics Services Enterprise (ESLSE) to Chinese firms. AidData has not independently corroborated this claim. 2. According to information that the Government of Ethiopia provided to the World Bank through the Debtor Reporting System (DRS), an official creditor from China and the Government of Ethiopia rescheduled interest payments worth $104,051,000 in 2018. This issue warrants further investigation. See https://www.dropbox.com/scl/fi/shqo5w418nwvocuiibhn8/IDS-Principal-and-Interest-Amounts-Rescheduled-14-July-2024.xlsx?rlkey=6mka34nyg2qpwd7lvgfxz6x87&dl=0 3. More research is needed to identify the precise date on which the China Eximbank debt rescheduling agreement was signed. One source suggests that it may have come shortly after April 9, 2019 (see https://repub.eur.nl/pub/134509/final-thesis-valeria-lauria-nov-2020.pdf). 4. The system identification number for the Addis Ababa–Djibouti Railway Rolling Stock Supply Project in the Government of Ethiopia’s Aid Management Platform (AMP) is 87143552129340. The AMP also includes a record (system identification number: 87143319101811) for an ETB 4,830,204,842 Chinese Government loan commitment (that was never disbursed) for a Rolling Stock Supply Project. For the time being, AidData assumes that this is a duplicate record of the China Eximbank loan record in the AMP (system identification number: 87143552129340) for the Addis Ababa–Djibouti Railway Rolling Stock Supply Project (also known as the Supply of Rolling Stocks, Simulators, Accessories and Related Services Project). 5. The loan identification number in the Government of Ethiopia’s Debt Management and Financial Analysis System (DMFAS) is 20850000 and the corresponding project name in DMFAS is ‘ROLLING STOCK SUPPLY OF ERP’. See https://www.dropbox.com/scl/fi/7nrczfanixvivmiyzqx3i/MOFED-Loan-Level-Data-on-Borrowing-Terms-and-Loan-Performance-September-2024_OTHER_PUBLIC.xlsx?rlkey=5sqhh9ii4t3x8cmz0jf6s7cod&dl=0 6. As of September 2024, the Government of Ethiopia recorded the loan's all-in interest rate as 7.90% in DMFAS. See https://www.dropbox.com/scl/fi/7nrczfanixvivmiyzqx3i/MOFED-Loan-Level-Data-on-Borrowing-Terms-and-Loan-Performance-September-2024_OTHER_PUBLIC.xlsx?rlkey=5sqhh9ii4t3x8cmz0jf6s7cod&dl=0 7. According to interview evidence that Dr. Valeria Lauria collected from the Director of the Debt Management Directorate within Ethiopia's Ministry of Finance and Economic Development about the debt rescheduling agreement, 'after the grace period ends in 2024, the payment obligation will be reduced by 50% of the amount due' (see https://repub.eur.nl/pub/134509/final-thesis-valeria-lauria-nov-2020.pdf). However, AidData has not yet established whether borrower is responsible for repaying the rescheduled loan according to a non-linear repayment schedule (i.e. where smaller principal payments are front-loaded and larger principal payments are back-loaded). This issue merits further investigation.