ECA supported Ethiopian projects show ‘railpolitik’ in action

(Financial Times, London, 31 May 2021) Two ECA lines of credit offer a comparison of Chinese and non-Chinese ECA infrastructure loans in the same African country. A decade ago, when Ethiopia’s late leader Meles Zenawi was planning 5,000km of standard gauge railway, the landlocked country was granted a $2.5bn loan by China Eximbank. That loan was tied to the construction of an 800km railway east-west between Addis Ababa, the capital, and the port city of neighbouring Djibouti. It would be built by Chinese engineers and use Chinese locomotives. A second rail 2013 project intended to run about the same distance south to north, between the central town of Awash and Mekelle, capital of the now war-torn Tigray region was undertaken by a Turkish construction group which helped broker $1.1bn of funding from Turkey’s Eximbank, Credit Suisse and European export credit agencies. Financing proved a big difference. When Ethiopia ran into problems servicing its debt due to a perennial shortage of foreign currency, the Chinese proved flexible, where in contrast, there were penalties built into the European loans for delayed repayment.