Ethiopia in talks with China to ease ‘serious debt pressure’ tied to New Silk Road rail link, envoy says

Ethiopia is renegotiating billions of dollars in loans from Beijing for a railway that links the Ethiopian capital to neighbouring Djibouti, to avoid being buried by “serious” debt woes tied to China’s controversial infrastructure push, Ethiopia’s top Beijing envoy said.

But despite the increasing debt pressure on Africa’s fastest growing economy, Ethiopian ambassador to China Teshome Toga Chanaka defended the ambitious trade and infrastructure plan known as the “Belt and Road Initiative” against criticism that it is a “debt trap” for developing countries.

“Those who may think this is an investment that is not worth investing on the Chinese side, I think that’s wrong because … if you are talking from an economic rationale, I think it makes a lot of sense,” Chanaka told the South China Morning Post in an interview last week at his residence in the Chinese capital.

“This is a very big country with huge potential for both passengers and cargo freight,” he said. “And eventually as our productivity increases and our export expands, definitely the cargo freight would be fully utilised,” Chanaka said. “There’s no question about that.”

Beijing is seeking to build roads, railways, ports and pipelines in more than 60 countries globally, mostly through state financing, under the belt and road, an effort to recreate the ancient Silk Road network of trade routes that connected the East and West.

As a top destination for Chinese loans in Africa, Ethiopia has received over US$12.1 billion from China’s state policy banks since 2000, according to a report last year by Johns Hopkins University, a private US research institution.