China Eximbank provides $439.17 million buyer’s credit loan for Addis Ababa Light Rail Project (Linked to Record ID#69476)

$439.17M USD

Funder	Export-Import Bank of China (China Eximbank)
Recipient Organization	Ethiopian Railways Corporation (ERC)
Country	Ethiopia
Start Date	Jun 22, 2011
End Date	Feb 22, 2031
Duration	7,185 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`1471`

Grant Description

China Eximbank provides $439.17 million buyer’s credit loan for Addis Ababa Light Rail Project On June 22, 2011, China Eximbank and the Ethiopian Railways Corporation (ERC) — an Ethiopian state-owned enterprise — signed a $439,173,628.23 (ETB 7,347,972,973) buyer’s credit loan agreement for the Addis Ababa Light Rail Project.

📋 Loan / Grant Terms

📅 Maturity13.093 years

⏳ Grace Period4.587 years

The loan's first scheduled principal payment date was January 21, 2016 and first scheduled interest payment date was January 21, 2013. The Government of Ethiopia provided a sovereign guarantee for the loan.

The borrower was expected to use the proceeds of the loan to partially finance the cost of a $475 million commercial contract [ID# ET/ERC/CREC/0901] between the ERC and China Railway Group Limited (CREC), which was signed on September 3, 2009. The ERC was responsible for directly funding the remainder of the commercial contract cost.

Its direct contribution was payable in ETB as a down payment (with exchange rate applicable to the base date.

According to the Government of Ethiopia’s Aid Management Platform (AMP), this loan achieved a 42% disbursement rate, with China Eximbank making 6 loan disbursements (worth ETB 3,097,176.899) between 2014 and 2016: an ETB 327,586,207 disbursement on January 8, 2014, an ETB 905,511,811 disbursement on July 8, 2014, an ETB 680,000,000 disbursement on October 8, 2014, an ETB 989,898,990 disbursement on January 8, 2015, an ETB 544,700 disbursement on October 7, 2015, and an ETB 193,635,191 disbursement on April 7, 2016.

The Addis Ababa light rail metro system is a 31.6 km electrified light rail transportation system with two lines: a 17.4 kilometer east-west line and a 16.9 kilometer north-south line.

The east-west line stretches from Ayat village to Tor Hailoch passing through Megenagna, Legehar and Mexico Square The north-south line passes through Menelik II Square, Merkato, Lideta, Leghar, Meskel Square, Gotera and Kaliti.

The light rail metro system was designed to facilitate transportation in a city of 5 million clogged with other forms of transportation. Each train was planned have a capacity to carry 286 passengers for a maximum capacity of 300,000 passengers/day. CREC was the EPC contractor responsible for project implementation.

The EPC contract identifies January 31, 2012 as the expected project commencement date and January 30, 2015 as the expected project completion date. It also identifies a defects liability period of one year. The project site was ultimately handed over to the EPC contractor on January 31, 2012. However, construction did not begin until April 2013.

Trial operation of the railway began on February 1, 2015.

The north-south line commenced operations on September 20, 2015, and the east-west line commenced operations on November 9, 2015.

According to official figures, the rail system carried on average 105,000-110,000 daily passengers during its first 14 months of operations. Tickets initially cost two to six birr ($0.08 to $0.20), depending on the distance of the trip.

ERC earned $5 million in revenue from the light rail line during the Ethiopian Fiscal Year 2016/17, and by January 2017, the rail system had carried over 50 million customers. The rail system was initially supposed to be run by the Shenzhen Metro Group and CRECG until 2020. However, in 2018, the ERC was prepared to take over the operation of the railway from CRECG.

Since then, the railway has faced an array of operational performance and revenue generation problems.

The Addis Ababa light rail metro system initially began operating with 40 trains, but as of 2021, it was regularly operating with approximately 20 trains.

Addis Ababa’s deputy mayor has also noted that the city’s electrical grid lacked the capacity to power the system before construction began.

Even with its own dedicated power supply, the Addis Ababa light rail metro system still experiences power outages and delays, leading to packed cars and poor service.

Additionally, in 2021, Ethiopia’s Office of the Auditor General found that, during its first four years in operation, the Addis Ababa light rail metro system generated $11.1 million of revenue but cost $154 million to operate.

It found that the system was falling far short of its original feasibility study, which said it would pay for its construction costs within 10-years through ticket sales, advertising and renting out spaces in stations, among other methods: '[t]he feasibility study has been inadequate, and it was conducted without collecting enough information. […] This, coupled with the absence of a maintenance center to fix the trains that need repair and other factors, have contributed to the losses sustained by the light railway.' There are some indications that the China Eximbank loan for the Addis Ababa Light Rail Project may have financially underperformed vis-a-vis the original expectations of the lender.

According to the Government of Ethiopia’s Aid Management Platform, as of September 2019, ICBC suspended about $67 million worth of loan disbursements 'due to [the] cross-default situation of the country’ (see Record ID#58616).

Then, in August 2021, China Eximbank withheld $339 million loan disbursements for 12 projects and halted project implementation due to Government of Ethiopia’s rapidly dwindling foreign exchange reserves and debt sustainability challenges.

📋 Loan / Grant Terms

📅 Maturity5 years

⏳ Grace Period1 year

Ethiopia’s Office of the Auditor General also found in 2021 that the ERC had fallen into arrears and paid $2.8 million in fines to China Eximbank for overdue loan repayments related to the Addis Ababa Light Rail Project.

Then, after considerable delay, the G20 Common Framework (CF) creditor committee for Ethiopia convened in September 2021, with the French Government and the Chinese Government serving as co-chairs. The CF debt rescheduling talks were still ongoing in mid-2023.

📋 Staff Comments

This project is also known as the Light Railway Project and the Addis Ababa Light Rail Transit (AA-LRT) Project. The Chinese project title is 亚的斯亚贝巴城市轻轨项目 or 埃塞——亚的斯亚贝巴轻轨.
For loan and debt rescheduling records with variable interest rates, AidData calculates the all-in interest rate at T0 based on the reference rate (such as LIBOR or EURIBOR) on the loan start date, plus any known margin. Please see the methodology for additional details.
The system identification number for this project in the Government of Ethiopia’s Aid Management Platform (AMP) is 87143122101162.
Behailu Sintayehu was the the ERC Project Manager of the Addis Ababa Light Rail Project.
One media source suggests that China Eximbank issued the loan agreement to state-owned Commercial Bank of Ethiopia, which then on-lent the proceeds of the loan to the ERC. This issue warrants further investigation.
The Ethiopian Government reportedly intended to use the Addis Ababa light rail metro system as a source of collateral to access bank loans for future extensions of the light rail metro system. Getachew Betru, CEO of Ethiopian Railways Corporation, has noted that ‘The Chinese city of Shenzhen was developed in the same manner.’ 7. As of June 2011, 1 Ethiopian Birr was equal to 0.058 United States dollars.
The commercial contract is also known as the ‘EPC/Turnkey Contract for Addis Ababa E-W & N-S (Phase I) Light Rail Transit Project’.
On September 1, 2014, the Chinese Government and the Ethiopian Railways Corporation (ERC) — an Ethiopian state-owned enterprise — signed a loan agreement worth approximately $79.11 million (ETB 1,572,763,419) for the Power Supply System for Addis Ababa Light Rail Transit (AA-LRT) Project. This loan is captured via Record ID#69476.
The face value of the China Eximbank loan is identified as $475 million in the Chinese Loans to Africa (CLA) database that SAIS-CARI released in 2020 and re-released in 2021 and the China’s Overseas Development Finance Dataset that Boston University's Global Development Policy Center released in December 2020 re-released in subsequent years. The face value of the loan is also identified as $475 million in MOFED's Public Sector Debt Statistical Bulletin No. 9 (see https://www.dropbox.com/scl/fi/6qg9kpel68wpf8dmrmyzl/Public-Sector-Debt-Statistical-Bulletin-No.-9-2007-08-2011-12.pdf?rlkey=qx7ian8rddw6sh86lj3vkfhtj&e=1&dl=0). Other sources put the figure at $403.75 million (see https://repub.eur.nl/pub/134509/final-thesis-valeria-lauria-nov-2020.pdf). However, AidData relies on the face value of the loan ($439,173,628.23) that is recorded in the Government of Ethiopia’s Debt Management and Financial Analysis System (DMFAS). See https://www.dropbox.com/scl/fi/7nrczfanixvivmiyzqx3i/MOFED-Loan-Level-Data-on-Borrowing-Terms-and-Loan-Performance-September-2024_OTHER_PUBLIC.xlsx?rlkey=5sqhh9ii4t3x8cmz0jf6s7cod&dl=011. The loan identification number in the Government of Ethiopia’s Debt Management and Financial Analysis System (DMFAS) is 20826000 and the corresponding project name in DMFAS is ‘A.A E-W&N-S LIGHT RAILWAY’. See https://www.dropbox.com/scl/fi/7nrczfanixvivmiyzqx3i/MOFED-Loan-Level-Data-on-Borrowing-Terms-and-Loan-Performance-September-2024_OTHER_PUBLIC.xlsx?rlkey=5sqhh9ii4t3x8cmz0jf6s7cod&dl=012. As of September 2024, the Government of Ethiopia recorded the loan's all-in interest rate as 8.36% in DMFAS. See https://www.dropbox.com/scl/fi/7nrczfanixvivmiyzqx3i/MOFED-Loan-Level-Data-on-Borrowing-Terms-and-Loan-Performance-September-2024_OTHER_PUBLIC.xlsx?rlkey=5sqhh9ii4t3x8cmz0jf6s7cod&dl=013. As of September 2024, the Government of Ethiopia identified the loan's last principal payment date and last interest payment date in DMFAS as July 21, 2025 (see https://www.dropbox.com/scl/fi/7nrczfanixvivmiyzqx3i/MOFED-Loan-Level-Data-on-Borrowing-Terms-and-Loan-Performance-September-2024_OTHER_PUBLIC.xlsx?rlkey=5sqhh9ii4t3x8cmz0jf6s7cod&dl=0), which suggests the possibility of a 1-year maturity extension. This issue warrants further investigation.

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