China's EximBank withholds $339 mln in funds to Ethiopia, cites debt repayment pressures

ADDIS ABABA, Aug 16 (Reuters) - The EximBank of China is withholding about $339 million in credit to Ethiopia on worries disbursing additional credit to Addis Ababa may exacerbate the country’s already growing debt and repayment problems, an Ethiopian official said on Monday.

“The bank have refused to release almost $339 million because they said it will create more pressure on our debt stock,” Demisu Lemma, director of Chinese cooperation at Ethiopia’s Ministry of Finance, told Reuters by phone.

China is the biggest bilateral lender to Ethiopia, Africa’s second-most populous nation. It has financed the huge state infrastructure projects including factories and a railway from the capital of landlocked Ethiopia to the seaport of Djibouti.

Last month, the Paris Club of sovereign creditors called for a creditor committee to be formed quickly to restructure Ethiopia’s debt, increasing pressure on China to engage under a new joint G20 framework to grant debt relief to poor countries.

EximBank said it was withholding the money until the restructuring negotiations called for by the Paris Club are finalised, the Ethiopian official said, adding that he did not know the timeline for those negotiations.

Withholding of funding will affect a total of 12 projects in the transportation and power sectors, he said.

Some of the firms implementing those projects had threatened to terminate work because they were facing cash shortages, he said.

In 2018, as doubts grew over the profitability of some Chinese-funded infrastructure projects, China’s mission to the African Union in Addis Ababa said that Chinese investment in the country was cooling and that the China Export and Credit Insurance Corp was reducing the scale of its investment there. (Reporting by Dawit Endeshaw; Additional reporting by Zoey Zhang in Beijing; Writing by Elias Biryabarema; Editing by Maggie Fick and Jonathan Oatis)