Ethiopia, Djibouti secure $3 bln loan for railway project

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The Ethiopian Railway Corporation (ERC) and the Djibouti government have secured nearly three billion dollars loan from the Chinese Export Import (EXIM) Bank for the construction of the railway project that stretches from Addis Ababa to Djibouti.

The agreement was signed by the CEO of the Ethiopian Railways Corporation, Dr. Eng. Getachew Betru, Minister of Economy and Finance of Djibouti, llyas Moussa Dawaleh and EXIM Bank Vice President Zhu Xinqiang on Wednesday May 22, in the presence of Prime Minister Hailemariam Desalegn.
A month ago ERC’s CEO together with the Ministry of Finance and Economic Development (MoFED) including Wassihun Abate, head of the Legal Department of MoFED paid a visit to China to conclude the loan agreement.
Wassihun told Capital that to secure the loan the government has made several negotiations with the bank. According him, the Chinese EXIM Bank had been undertaking a feasibility study of the project that was already commenced with finance secured from the Ethiopian government.
Currently, 15 percent of the 756km Addis Ababa / Sebeta – Djibouti railway project is completed and the finance secured from EXIM Bank will have a crucial role to complete the project on time.
According to the officials, Ethiopia secured 2.4 billion dollar loan from the bank and the balance went to the Djibouti side.  
The loan secured from EXIM Bank of China will also cover the cost of the remaining 100km railway project that extends from the Ethiopian border to the Port of Doraleh in Djibouti. The project is said to play a pivotal role in reducing time to transport goods from the port to the country and greatly contributes to the economic growth of Ethiopia.
The 317km Addis Ababa/Sebeta-Me’eso railway project is being constructed by China Railway Group (CREC), and the remaining Me’eso -Dewale 339km line is under construction by China Civil Engineering Construction Cooperation (CCECC), a Chinese state-owned enterprise.
CCECC is also undertaking the construction of the railway line inside Djibouti.
Chinese financial institutions are strong partners for the majority of Ethiopia’s railway projects that stretches throughout the country. Projects in northern Ethiopia that will commence in the next few months have also already been awarded to Chinese and Turkish companies.
Chinese companies have undertaken the construction of the 34km Addis Ababa city Light Railway Transit (LRT), and the National Railway network. For instance, the Chinese CREC that is carrying out the construction of the metropolitan railway is also constructing the first lot of the 317km Addis Ababa-Me’eso railway line.
The other Chinese company CCECC is also constructing the 268.2km Mekele -Woldiya railway line that is estimated to cost about USD 1.6 billion in vendor financing.
Meanwhile, Yapi Merkezi Construction Industry Inc, a Turkish company, is constructing the 389km Awash-Woldiya/Hara Gebeya railway line, which is projected to cost about USD 1.7 billion. It is financed by the Turkish EXIM Bank and is expected to be completed within 42 months.
The project will link Woldiya/Hara Gebeya- Semera- Dicheto-Elidar in the northern part of Ethiopia with the Tadjourah port of Djibouti, which will give the country an alternative access to the new port currently under construction. This connection will greatly contribute to the economic development of the country especially with regards to the mining projects that are being undertaken in the north eastern part of Ethiopia. The 389km Awash-Woldiya/Hara Gebeya Railway would also link Mekele to Djibouti.
Currently, ERC is in the process of setting up a new National Railway Standard that will aid in the evaluation of projects that are in the works and those that will be carried out in the near future. The formation of a National Railway Standard is already under development by the Russian-based institution, St. Petersburg State University of Transport.
The Ethiopian government plans to construct more than 2,300 km of rail lines during the five-year Growth and Transformation Plan (GTP).