Ethiopia starts discussing with China to convert dollar dept to yuan
(MENAFN) Ethiopia has entered negotiations with China to convert part of its $5.38 billion debt into yuan-denominated loans, as the country works to ease foreign-exchange strain and expand trade relations with Beijing.
National Bank of Ethiopia Governor Eyob Tekalign said the talks took place in Beijing last month with the Export-Import Bank of China and the People’s Bank of China, focusing on payments, trade facilitation, and debt restructuring.
“China is a very important partner for us now… It really makes sense to arrange some currency swap … we’ve requested officially and then working on it,” Eyob told Bloomberg on Friday after attending the International Monetary Fund’s annual meetings in Washington.
The move follows Kenya’s recent decision to convert three Chinese-financed railway loans from US dollars to yuan, which the Finance Ministry said would reduce annual interest costs by about $215 million. Nigeria also renewed a 15-billion-yuan ($2 billion) currency swap with the People’s Bank of China in December to facilitate trade settlements between the naira and yuan.
Ethiopia’s economy has been under significant pressure due to the COVID-19 pandemic and a two-year civil war in the northern Tigray region that ended in 2022. The country defaulted on its $1 billion international bond in December 2023 but later reached a relief deal with its official creditors under the G20 Common Framework—co-chaired by France and China—which provides over $3.5 billion in cash-flow relief. Talks with private bondholders, however, remain difficult.
Finance Minister Ahmed Shide announced in September that Ethiopia and China had agreed on a currency-swap framework to promote birr-yuan trade as part of efforts to rebuild the economy and broaden international partnerships.
Ethiopia joined BRICS in January 2024, alongside Brazil, Russia, India, China, South Africa, Egypt, Iran, the UAE, and Indonesia. The bloc has encouraged the use of local currencies in trade to reduce dependence on the US dollar—a move that US President Donald Trump has criticized, threatening retaliatory tariffs and sanctions.
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