Ethiopia has begun talks with Chinese authorities to convert part of its $5.38 billion (Ksh695.23 billion) debt into yuan-denominated loans, following Kenya’s recent decision to make a similar shift. The move aims to reduce financing costs, ease foreign exchange pressure, and strengthen bilateral trade ties with China.
According to Bloomberg, National Bank of Ethiopia Governor Eyob Tekalign confirmed that discussions took place last month in Beijing with the Export-Import Bank of China and the People’s Bank of China.
“China is a key partner for us, with rising trade and investment flows. It is sensible to explore a currency swap, including partial debt conversion,” Tekalign said on the sidelines of the IMF and World Bank meetings in Washington.
Ethiopia, which defaulted on some of its external debt obligations in 2023, is currently restructuring about $15 billion (Ksh1.94 trillion) in total debt. Shifting part of this to yuan could provide relief amid rising global interest rates and a strong U.S. dollar.
IMF Africa Director Abebe Selassie noted that such currency swaps could deliver “significant fiscal relief” to African nations heavily indebted to China, allowing them to manage repayments more sustainably.
Kenya recently completed a similar conversion of its $5 billion (Ksh646.15 billion) loan from dollars to yuan. The National Treasury, led by Cabinet Secretary John Mbadi, said the move will save Kenya approximately Ksh27.78 billion ($215 million) annually in interest payments.
Kenya’s debt conversion primarily covers loans used to finance the Standard Gauge Railway (SGR), one of Africa’s largest China-backed infrastructure projects.
Ethiopia’s move mirrors a broader trend among developing economies to diversify away from the U.S. dollar, signaling a deepening of economic ties between Africa and China in an evolving global financial landscape.
