Ethiopia to Djibouti Railway to Be Complete on October 2015, PM Says

(Bloomberg) – 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.

 

ethiopia djibouti railway

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.

To contact the reporter on this story:
William Davison in Addis Ababa at
wdavison3@bloomberg.net

To contact the editors responsible for this story:
Paul Richardson at
pmrichardson@bloomberg.net
Michael Gunn, John Bowker

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