The Government China has agreed to extend debt settlement period for Ethiopia, Premier of Ethiopia said.
The $4 billion loan Ethiopia received from China for the construction of Ethiopia-Djibouti railway, which was supposed to be paid within 10 years, is now extended to 30 years, according to Prime Minister Abiy Ahmed of Ethiopia, who returned to Addis Ababa today after attending the China – Africa Forum in Beijing.
In Africa, Ethiopia is one of the highly indebted countries with a total external loan of over $28 billion including the recent one billion dollars from the United Arab Emirates.
Reports show that from 2000 – 2014, Ethiopia has received a total loan of $12 billion from China. The money went to different infrastructure projects including highways, power generation and railways.
The reliance of Ethiopia on Chinese loans has been often mentioned as a red flag by independent economists who have been closely monitoring the issue. In one of his papers in 2016, Addis Ababa University Economics professor Alemayehu Geda, indicated that the country’s economy is at the verge of collapsing.
He indicated if Ethiopia fails to pay back its debt, it will endanger the existence major state owned companies, including the highly profitable ones, such as, Ethiopian Airlines.
“Take for instance China, which has loaned over $17 billion to the Ethiopian government for infrastructure projects…What will happen if they stopped such financing tomorrow? What if, for instance, the Chinese government tomorrow says sell for me Ethio Telecom or sell to me Ethiopian Airlines or give me some share or buy my airplanes, or I will stop such credit financing? The country will collapse, I guarantee you,” he said, presenting a paper in Addis Ababa in April 2016.