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China benefits Ethiopia’s debt restructuring and beyond

 On February 27, 2023, a plane landed at the Bole International Airport with Ahmed Shide, Ethiopia’s minister of finance, on board. Ahmed brought back not only greetings from his Chinese counterpart but also the hope that China and Ethiopia could work together in trade, business, and investment to reach more of their full potential. His seven-day visit to China shows the deep-rooted and everlasting ties between the two great civilizations.

China, as a comprehensive strategic cooperative partner, always bears in mind Ethiopia’s needs in various sectors, including financing. It has made, is making, and will always make contributions to Ethiopia’s economic and social development with the principles of sincerity, real results, amity, and good faith. After the conflict in the northern part of Ethiopia, China is making great efforts in its rebuilding and rehabilitation process. A friend in need is a friend indeed—this must be a reflection on China for most Ethiopians.

Nonetheless, there are misconceptions that need be addressed. In its weekly issue, The Reporter discussed Ethiopia’s foreign debt to China. Data never lies. As of December 31, 2020, the total public and publicly guaranteed (PPG) external debt of Ethiopia was USD 28.9 billion, of which multilateral creditors accounted for more than 50 percent, according to available data from the IMF.

In particular, the World Bank’s claims were as high as USD 10.9 billion, accounting for nearly 38 percent of Ethiopia’s total external PPG debt and making it the country’s largest creditor. Bilateral creditors (including China) only accounted for nearly 37 percent of the total. Thus, the report’s claim that “China holds three-quarters of Ethiopia’s USD 27 billion external debt” is inconsistent with the facts.

China attaches great importance to Ethiopia’s debt treatment under the Common Framework. As the co-chair, China has always been the most firm and powerful promoter of Ethiopia’s Creditor Committee. The Chinese side has endeavored to eliminate political interference and actively cooperated with the French side to promote the convening of the creditor committee. A total of five creditor committee meetings have been held to discuss key issues. After the first and fourth meetings, a joint statement of the creditor committee was issued, fully expressing its firm position on assisting Ethiopia in solving its debt problem.

The progress of the debt treatment process has been greatly affected, mainly due to the lack of technical materials and data information such as debt sustainability analysis (DSA) and financing gaps, which are the basis for the Committee’s follow-up work.

China has called on multilateral technical experts at previous meetings to advance Ethiopia’s DSA and loan assessment work as soon as possible to provide financial support to Ethiopia at an earlier date. As the co-chair of the Creditor Committee, China’s efforts to coordinate and promote the progress of Ethiopia’s debt treatment are obvious to all.

In response to Ethiopia’s request, China has completed the bilateral debt restructuring in 2019 and the G20 debt suspension from 2020 to 2021. This has taken a huge load off Ethiopia’s shoulders when it comes to servicing its debts. China has responded positively to every request in difficult times and has always provided Ethiopia with the greatest support within its capacity, actively making efforts to alleviate Ethiopia’s debt distress, and is by no means the party that delays the progress.

Even though it was said that China should be responsible for why Ethiopia’s debt restructuring program got stuck, it is a well-known fact that China always helps Ethiopia out. The zero-tariff treatment for 98 percent of the tariff line with 8,804 items of products exported to China is just a recent case in point.

The preferential treatment should also relieve the pain caused by the US’s ban on the African Growth and Opportunity Act (AGOA). Such an arrangement, like all other tangible cooperation, will produce a rich harvest for the two peoples and, in particular, improve the well-being of Ethiopians.

(Balew Demissie (PhD) is a communication and publication consultant at the Policy Studies Institute.)

Contributed by Balew Demissie (PhD)

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