By Eyasu Zekarias

The Minister of Industry, Melaku Alebel, recently addressed the House of People’s Representatives, revealing significant challenges in the country’s foreign exchange supply. He noted that the current demand from banks for foreign currency exceeds typical levels, making it difficult to provide the necessary foreign exchange as planned. This situation has arisen amidst ongoing macroeconomic reforms that have created opportunities for industries by reducing export and import costs.

During his six-month performance report presentation, Minister Melaku highlighted that $468.4 million was initially targeted for the manufacturing sector, representing 79% of the planned amount. However, only $369 million was delivered in the first half of the fiscal year, marking a 35% increase from $274 million during the same period last year. Despite this progress, Melaku pointed out that banks are requiring more bonds than usual due to a lower-than-expected foreign exchange supply.

The minister emphasized the need for banks to reassess their lending practices, urging them to focus on financing the manufacturing sector instead of prioritizing short-term profit-generating ventures. In the past six months, a total of 3.4 billion birr was earmarked for operating loans and lease financing for small and medium-sized manufacturing industries, with an additional 7.8 billion birr planned.

Melaku stated that while policies aimed to increase loan provisions to the manufacturing sector from 13% to 24%, the current rate stands at only 16%. He expressed concern that operating loans for small and medium-sized enterprises have only increased marginally, by less than 1% of available bank capital.

This discussion comes at a time when Ethiopia’s foreign exchange reserves are reportedly dwindling, barely covering one month of imports as of early 2024. The government is under pressure to enhance its foreign currency management strategies amid rising inflation and external debt challenges.

By our staff reporter

For debt treatment under the G20 Common Framework (CF), the Ethiopian government has announced a new timeline for reaching a Memorandum of Understanding (MoU) with the Official Creditor Committee (OCC), stating that an agreement is expected by April.

During his recent visit to Ethiopia’s primary economic partner, Finance Minister Ahmed Shide met with Chinese commercial lenders and other creditors.

For the past four years, Ethiopia has been negotiating debt re-profiling with G20 countries under the CF framework. Although the government anticipated observable outcomes by the end of last year, it has not yet reported any progress.

According to the latest statement released after the completion of the second review of the 48-month Extended Credit Facility (ECF) by the Executive Board of the International Monetary Fund (IMF), the government is aiming to achieve results by April.

In July, after receiving assurance from the OCC for debt re-profiling, the IMF approved USD 3.4 billion under the ECF.

After the board meeting, Deputy Managing Director Nigel Clarke remarked, “The significant progress made towards reaching an agreement on a debt treatment with the OCC under the G20 Common Framework is an important step towards restoring debt sustainability.”

The IMF noted that by the time of the third assessment, the Ethiopian authorities aim to have an approved MoU in place.

It is worth mentioning that the administration had informed the IMF that it expected to finalize a deal with creditor countries by the time of the second review last month.

Furthermore, the authorities are eager to pursue similar treatments for holders of Eurobonds and other foreign commercial debts.

The responsibility for negotiating Ethiopia’s lengthy debt restructuring rests with the G20’s CF creditor group for Ethiopia, which is co-chaired by China and France.

This week, a delegation led by Finance Minister Ahmed, which included the Prime Minister’s macroeconomic advisor Girma Biru (Amb), visited China, one of Ethiopia’s largest bilateral creditors that also provides commercial loans.

Reports from the Ethiopian Embassy in China indicate that the delegation met with representatives from the China Development Bank (CDB), Exim Bank of China, the International Industrial and Commercial Bank of China (ICBC), and other officials from the Chinese Ministry of Finance and state enterprises to discuss economic cooperation and strengthen the two nations’ all-weather strategic partnership.

The financial institutions visited by Ahmed’s delegation are significant creditors that also hold undisbursed credits; however, China has been delaying new loans over the past few years.

According to the Ministry of Finance (MoF), Ethiopia is seeking USD 1.4 billion, or 14%, of the total USD 9.9 billion in undisbursed fresh credit from the Chinese government. Additionally, it is anticipated that Chinese financiers, such as ICBC and CDB, will provide an extra 8.8% of the total undisbursed loan, amounting to USD 870 million.

“The forecasts include re-profiling of debt payments of USD 1.4 billion due to all official bilateral creditors in 2023 and 2024,” the MoF recently stated, referring to the significant temporary relief provided by the debt service standstill agreement reached with OCC members at the beginning of the previous budget year.

However, the anticipated USD 3.5 billion in debt treatment under the CF totals USD 4.9 billion in debt relief.

By Eyasu Zekarias

The Ethiopian Roads Authority (ERA) has reported significant challenges in the completion of road projects due to rising costs affecting contractors. Inflation has exacerbated delays and hindered overall project performance, making it increasingly difficult for contractors to secure necessary financing.

During a review by the Standing Committee on Urban Infrastructure and Transport of the House of People’s Representatives, concerns were raised regarding the low performance standards in major road works, including procurement and maintenance. Melka Bekele, Deputy Director General of ERA’s Construction Project Management, attributed these issues to increased resource requirements driven by inflation.

ERA highlighted that road projects typically require substantial fuel resources, averaging four fuel tanks per contractor, costing around 4.5 million birr each. To adequately finance fuel needs, contractors require between 18 to 20 million birr monthly. Without sufficient funding for fuel, project performance suffers significantly.

Despite improvements in cement supply, Melka noted that price discrepancies between factory and market rates complicate procurement efforts. Furthermore, the aging machinery within the industry poses another challenge, as many machines are outdated and hinder project execution. The high rental and purchase costs of machinery have created gaps in contractor capabilities.

Security concerns have also impacted project implementation, with 27 projects currently stalled. The ongoing conflict in various regions has led to delays and heightened risks for contractors operating in those areas.

By our staff reporter

Ambassador Hu Changchun welcomed guests to the Chinese New Year Reception held at the newly completed Chinese Mission compound on January 23, 2025. This event marked the first official gathering in the modern facility, which took three years to construct and symbolizes China’s commitment to strengthening ties with Africa and the African Union (AU).

In his opening remarks, Ambassador Hu emphasized the significance of the Spring Festival, which has recently been inscribed on UNESCO’s List of Cultural Heritage. “As the most important and joyous traditional festival in Chinese culture, we are delighted to share this joy of new year and family reunion with our African friends,” he stated.

The reception brought together diplomats, government officials, and members of the local community to celebrate the upcoming Year of the Snake. Ambassador Hu expressed gratitude to the AU, the Ethiopian government, and all attendees for their support of the new mission and its initiatives. He also congratulated the newly established China-AU Chamber of Commerce, which aims to enhance business exchanges between China and Africa.

Reflecting on the past year, Ambassador Hu highlighted significant achievements in China-Africa cooperation. He noted that the Forum on China-Africa Cooperation (FOCAC) Beijing Summit had successfully elevated China-Africa relations to an “all-weather community with a shared future for the new era.” The ambassador acknowledged Chairperson Moussa Faki’s leadership during his delegation’s visit to China, which contributed to the summit’s success.

Ambassador Hu further detailed various collaborative efforts between China and Africa over the past year. He mentioned that 200 AU officials were invited to China for training programs, strengthening ties across multiple sectors. Additionally, he recognized numerous high-level Chinese delegations visiting AU institutions, reinforcing China’s commitment to partnership with African nations.

The ambassador also discussed practical cooperation initiatives such as the “China-Africa Perennial Rice Technology Center,” “Chinese Language Workshop,” and “China-Africa Vocational Education Cooperation Program.” These programs aim to bolster educational exchanges and technical collaboration between China and African countries.

Looking ahead to 2025, Ambassador Hu expressed optimism about the future of China-Africa relations. He highlighted recent visits by H.E. Wang Yi, underscoring China’s long-standing commitment to Africa as a reliable partner in development. “Through concrete actions, China has demonstrated that no matter how international and regional circumstances change, we will always be Africa’s most reliable friend,” he affirmed.

In closing, Ambassador Hu called for continued collaboration with African nations to implement outcomes from the FOCAC Beijing Summit and pursue high-quality Belt and Road cooperation. He encouraged attendees to embrace hope for the new year, wishing everyone harmony and prosperity in their endeavors.

As guests mingled and enjoyed traditional Chinese performances during the reception, it was evident that this celebration not only marked a new year but also reinforced the enduring bond between China and Africa. The event served as a reminder of shared cultural values and mutual aspirations for growth and development in an increasingly interconnected world.