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Can China keep investment strategy on track as Ethiopian railways hit buffers?
- Ethiopia’s struggles to service loans that paid for railways and other infrastructure are complicated by conflict and coronavirus
- But some unprofitable projects also raise questions over the risks involved for Chinese lenders
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If there is an African country that has sought to emulate the Chinese development model, it is Ethiopia. In the capital Addis Ababa, evidence of Chinese money and influence is everywhere: roads, skyscrapers, airports and an electrified railway.
But Ethiopia is facing challenges in servicing loans it took on to build rail links and other infrastructure projects. The coronavirus pandemic and deadly Tigray war have compounded this, pushing the country into high risk of debt distress and raising questions over the risks attached to some of China’s investments.
Ethiopia is the second-largest recipient of Chinese loans in Africa after Angola. It received US$13.7 billion of the US$148 billion in loans that China advanced to African countries between 2000 and 2018, according to the China Africa Research Initiative at Johns Hopkins University.
The money has gone into building roads, power plants, railway lines, sugar processing plants and industrial zones.
02:09
Kenya opens massive US$1.5 billion railway project funded and built by China
Kenya opens massive US$1.5 billion railway project funded and built by China
Ethiopia is a key Chinese ally and home to major projects under China’s transnational infrastructure strategy the Belt and Road Initiative. The Ethiopia-Djibouti railway, Africa’s first cross-country electric railway and majority funded by Exim Bank of China (Eximbank), is one example.
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