Ethiopia and China are in talks over a proposal to convert part of the $5.38 billion debt the East African country owes Beijing into Yuan.
Eyob Tekalegn, Ethiopia’s newly appointed national bank governor said on Sunday in an interview with local media in the United States that the talks for potential swap began last month during his visit to Beijing.
The aim is to reduce financing costs and strengthen bilateral trade. Ethiopia followed the example set by its neighbour, Kenya in support of China’s efforts to internationalise the yuan.
Ethiopia and China signed a currency swap deal in September last year and based on the agreement, the two countries were supposed to transact in Ethiopian Birr and Chinese Yuan, aiming at strengthening their economic ties and business relationships.
This agreement was reached during talks between Ethiopian Prime Minister Abiy Ahmed and Chinese President Xi Jinping.
Eyob Tekalign, governor of the National Bank of Ethiopia, 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 Ethiopia, with rising trade and investment flows,” he said in an Oct. 17 interview in Washington, during the International Monetary Fund’s annual meetings. “It is sensible to explore a currency swap, including partial debt conversion,” he said.
Ethiopia defaulted on external obligations in 2023 and is negotiating the restructuring of approximately $15 billion of debt.
The country reached a memorandum of understanding with its official creditor committee, co-chaired by China and France, in July. Talks with Eurobond holders have been more complex, with discussions recently stalling over additional payouts tied to economic performance.
The Ethiopian government intends to finalise bilateral agreements with official creditors by the end of this year and to conclude talks with commercial creditors by March 2026.
MG/as/APA