Chinese Government provides RMB 540 million interest-free loan for Mekelle City Water Supply Project (Linked to Project ID#60761, #60762)

On May 10, 2018, the Chinese Government and the Government of Ethiopia signed a preferential loan framework agreement for the Mekelle City Water Supply Project. Then, on June 13, 2018, China Eximbank and the Government of Ethiopia signed an RMB 1,070,000,000 (ETB 4,593,582,599 or $156 million) government concessional loan (GCL) agreement for the Mekelle City Water Supply Project (captured via Project ID#60762). On the same day, China’s Ministry of Commerce and the Government of Ethiopia signed an RMB 540,000,000 (ETB 2,318,256,639) interest-free loan agreement for the Mekelle City Water Supply Project (captured via Project ID#66045). According to the Government of Ethiopia’s Aid Management Platform (AMP), the GCL carries a 2% interest rate. However, the other borrowing terms of the GCL and the interest-free loan are unknown. Ethiopia’s House of Representatives ratified both loan agreements on April 6, 2019. The borrower was expected to use the proceeds of the GCL and the interest-free loan to finance a commercial contract with the Government of Ethiopia and China Gezhouba Group Co. Ltd. (CGGC). According to the Government of Ethiopia’s AMP, two disbursements took place in 2020: an ETB 274,488,122 disbursement on April 2, 2020, and an ETB 682,257,203 disbursement on September 1, 2020. However, it is unclear if these disbursements took place through the RMB 1,070,000,000 (ETB 4,593,582,599) China Eximbank loan, the RMB 540,000,000 (ETB 2,318,256,639) MOFCOM loan, or both loans. This project involves the construction of the Gereb-Giba Dam on the Giba river and the installation of a water pipeline network to supply water to households, industrial parks and factories in and around the city of Mekelle (the capital of Ethiopia's northern Tigray regional state). Upon completion, the project is expected to meet the water needs of the estimated 400,000 residents of Mekelle. It is also expected to generate a maximum storage capacity of 363 million cubic meters during the rainy season, an annual water supply of 53.65 million cubic meters, and an average daily water supply of 124.43 thousand cubic meters. The project was also expected to create 1500 jobs for local people during the construction phase. CGGC was the EPC contractor responsible for implementation. A groundbreaking ceremony took place on September 22, 2019. Then, on March 17, 2020, a river closure ceremony took place and dozens of heavy trucks poured dirt and stone into the Giba river. The Chinese Ambassador to Ethiopia, Mr. Tan Jian, and Mr. Debretsion, President of Tigray Regional State attended the closure ceremony, which marked the beginning of a new phase of the project (dam main body filling). Then, on November 11, 2020, after a violent conflict erupted between the Tigray People's Liberation Front (TPLF) and the Government of Ethiopia, the Chinese Embassy in Ethiopia evacuated 600 Chinese workers (including CGGC workers assigned to the Mekelle City Water Supply Project) from Tigray State. The originally scheduled project completion date was March 1, 2023.

Additional details

1. This project is also known as the Mekelle (GIBA) Water Supply Development Project. The Chinese project title is 马克雷供水项目 or 马克雷供水开发项目. 2. No information on borrowing terms was identified, so standard China Eximbank GCL borrowing terms (2% interest rate, 5 year grace period, 20 year maturity) and standard MOFCOM interest-free loan borrowing terms (0% interest rate, 10 year grace period, 20 year maturity) are assumed. 3. The AMP system identification number for the project is 87143497122898.

Number of official sources

16

Number of total sources

25