The Export and Import Bank of China (EXIM) has shown keen interest to finance a substantial portion of ESL’s (Ethiopian Shipping Lines S.C) loan demands for the procurement of nine new ships with an aggregate carrying capacity of 350,000 tonnes. EXIM could provide up to 80 per cent of ESL’s construction costs; about 240 million dollars. The deal reveals the Ethiopian government’s shift from its traditional creditors.
ESL has already signed a memorandum of understanding with a Chinese-based manufacturing company for the construction of seven container and bulk cargo vessels with a capacity of 28,000 tonnes each and two fuel carrying vessels with a capacity if 41,500 tonnes each.
However, the definitive agreement remains unsigned due to credit arrangement, Ambachew Abreha, managing director of ESL said, while discussing his company’s half fiscal year performance on Monday February 15, 2010.
With the construction of the ships expected to cost ESL close to 300 million dollars, an amount that is beyond the company’s capacity, “we told the company to find credit providers for 80 percent of the vessels’ total cost that already obtained the company’s consent and it is now finalising the credit arrangement with the government of China,” Ambachew explained.
The Chinese Government through its EXIM bank has expressed its willingness to cover up to 80 percent of the total cost of the ships with a long term credit which is expected to be signed soon, according to Ambachew.
The deal would add some 350,000 tonnes carrying capacity to the existing 150,000 tonnes carrying capacity of ESL’s nine vessels and is also expected to help ease the cost of the government’s fuel transportation.
Though ESL is the sole shipping company responsible for the transportation of the country’s imports, it does not own fuel carrying vessels, forcing the state company to rent vessels for the transportation of fuel. expensive.
The Ethiopian Electric Power Corporation, Ethiopian Telecommunication Corporation and Ethiopian Road Authority are known for their strong attachments to Chinese firms and their credit facilitation.
ESL’s current approach explicitly shows the country’s shift to Asian countries away from former creditors, an expert said.
Ethiopia had around 2.7 billion dollars of foreign debt as of the year 2009. Around 51 percent of the total outstanding debt is from multilateral creditors such as Paris Club Creditors, according to the International Monitory Fund’s (IMF) recent document.
In recent years, however, the share of Paris Club creditors in total external debt has declined, while the share of non-Paris Club creditors has increased. Between 2006/07 and 2008/09, the share of Paris Club creditors fell from 16 to 8 percent and the share of non-Paris Club creditors (mostly from China and India) increased from 19 to 35 percent, the document revealed.