Thursday, March 30, 2023
BusinessChinese-funded road project in jeopardy, as debt restructuring delays

Chinese-funded road project in jeopardy, as debt restructuring delays

Financing for the project may come from government coffers

The 4.8 billion birr express road project linking Arsi Negelle and Hawassa is in limbo as China withholds funding.

It is one of the infrastructure projects financed by the Chinese Export Import Bank (Ex-IM), which has paused funding for the road’s construction as Ethiopia’s request for debt restructuring has been delayed.

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The construction of the expressway was projected to be completed in three years, beginning in March 2018. It is 52 kilometers long, 31 meters wide, and has four lanes.

Officials at the Ethiopian Roads Administration, the owner of the project, think the express route has a significant economic impact on the Addis-Moyale trade corridor.

At the start of the project in March 2018, China promised to fund 85 percent of the 4.8 billion birr construction budget.

Given the halt in Chinese funding as of 2021, the Ex-Im bank was only able to fulfill one-third of its committed funds.

“We are on the edge of suspending the whole project owing to a lack of funds,” said Addishiwot Tadesse, project manager of the Modjo Hawassa Expressway Road Project, which includes the Arsi Negele to Hawassa project.

After Ethiopia sought debt restructuring due to default worries, China Ex-Im Bank withheld approximately USD 300 million in credit. The decision has had an effect on 12 projects in the road and power sectors. The Modjo-Hawassa Expressway project, which began with a 13 billion birr budget, has suffered the most from the suspension.

In its latest Medium-Term Macroeconomic and Fiscal Framework, the Ministry of Finance outlined a proposal to fund the whole project using government funds. However, to date, little progress has been made in this regard.

“No significant attempt has been made to finance the project with government budget. And I don’t believe it is realistic given the enormous amount of foreign currency required to import materials for the construction of the road,” Addishiwot said.

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