Sunday, September 24, 2023
NewsChina-Ethiopia funding row threatens key infrastructure link

China-Ethiopia funding row threatens key infrastructure link

A Chinese construction firm building the final leg of an Ethiopian expressway has threatened to halt work unless it receives at least USD 50 million for the project, sources tell The Reporter.

China Communications Construction Company (CCCC) was contracted by the Ethiopian Roads Administration to construct the 57-kilometer Batu Ziway-Negele Arsi section of the 203-kilometer Modjo-Hawassa expressway for USD 196 million. China’s Ex-Im bank was expected to fund the project but withheld the disbursement.

The move stems from Ethiopia’s request to restructure its loans, which has forced China to renegotiate terms.

Without the USD 50 million for work completed so far, CCCC has threatened to terminate its contract with the Administration, potentially halting construction of the key expressway link.

The finance to fund the contractor’s work came from China’s Export-Import Bank, which has withheld disbursing the loan budget.

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“The contractor wants payment in dollars, but Ethiopia doesn’t have foreign currency, so it only pays in birr,” Deputy Director General of the Administration, Yetimgeta Asrat told The Reporter.

Yetimgeta warned that without payment for work already completed, “the contractor’s work is breaking up.”

The federal government has allocated 60 billion birr for ongoing Ethiopian road projects in the next fiscal year. But officials of the Roads Administration say the budget is significantly less than requested, meaning no new road projects can begin.

Chinese companies, which dominated Ethiopia’s infrastructure sectors over the past decade, have begun halting projects as Ethiopia’s foreign currency shortage worsens due to delayed debt restructuring.

The latest Chinese firm to pull out of an Ethiopian project is China State Construction Engineering Corporation (CSCEC), which terminated its contract with the Ministry of Youth and Sport.

CSCEC demanded a price escalation adjustment of USD 314 million – 17 billion birr – to cover increased construction costs stemming from higher material prices. But the Ministry rejected the request.

On the other hand, Ethiopia’s request for debt relief and restructuring has stoked tensions with some of its major creditors like China, potentially threating infrastructure projects seen as crucial to the country’s development, including the express road project.

Talks to restructure Ethiopia’s debt have stalled amid finger-pointing between its creditors.

Bilateral creditors like China and France have blamed the IMF for failing to conduct an adequate debt analysis determining how much needs to be restructured. Meanwhile, the IMF accuses China of demanding that the Fund shoulder part of any potential debt relief – a controversial request that the IMF had not previously agreed to.

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