Ethiopia to Djibouti Rail to Be Complete in Year’s Time, PM Says

An electrified rail link from Ethiopia’s capital along its main trade route to neighboring Djibouti will be completed by October 2015, Prime Minister Hailemariam Desalegn said.
The Railways Corp. project, funded with a $1.6 billion advance from the Export-Import Bank of China and by Ethiopia’s government, is half-complete, he said yesterday in the capital, Addis Ababa.
“Priority has been given to it,” Hailemariam said in response to questions from members of parliament. “Next October the line will be finished.”
The 656-kilometer (408-mile) railway is part of a five-year growth plan for Ethiopia begun in mid-2010 that seeks to spend 569.2 billion birr ($28.4 billion) of public and private funding on infrastructure and industry. The new route to Djibouti may reduce travel times by half, according to the government.
Seven out of 10 cane factories being built by the state-owned Sugar Corp. will also be completed in a year’s time, with the rest finished in the subsequent six months, the premier said. “We will be able to export the sugar they produce this year,” he said, referring to the Ethiopian calendar year that ends Sept. 11.
Sugar Corp. signed government guaranteed loans worth $580 million last October with the China Development Bank to finance six processors in the South Omo region, while China’s Ex-Im Bank provided a credit-line of $500 million in May for a sugar plant in the northern Tigray region, according to data on the Finance Ministry’s website.

Increase Output

In Sept. 2011, the government said it aimed to increase sugar production almost eightfold to 2.3 million metric tons by mid-2015, leaving a surplus for export of 1.25 million tons. Plans to build 10 sugar factories, a 2,395-km rail network and boost the power supply fourfold to 8,000 megawatts haven’t been fully achieved, said Girma Seifu, the only opposition legislator of 547 members of parliament.
“At this point in time we’re just importing sugar,” he said by phone from the capital yesterday. “The plan is just for propaganda purposes rather than implementation.”
Turkish contractors Yapi Merkezi Insaat VE Sanayi AS have begun work on a northern railway line from Awash to Woldiya, while a Brazilian-funded project to the southwest hasn’t begun, Hailemariam said. Russia plans to fund a link to Kenya, according to the Railways Corp. “Because there is an economic slowdown those countries have not been able to release the loans,” Hailemariam said.

Loan Maturities

An advance of $300 million from the Export Credit Bank of Turkey funds the Turkish project at rates of Libor 6 month plus 3.75 percent, according to the Finance Ministry. Credit Suisse Group AG (CSGN) is loaning $450 million at the same rate and $415 million at Libor 6 month plus 4.59 percent for the line, the data says. All deals were signed July 7. The maturity of the recent loans for rail and sugar is around 12 years. That compares with a four-decade repayment period for World Bank advances, which come with interest rates of about 0.75%.
Ethiopia is on the “cusp” of going from a low to moderate risk of debt distress, the International Monetary Fund said this month. “Commercial loans to finance large public investment projects by state-owned enterprises could increase the risk to Ethiopia’s public debt sustainability,” it said.
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