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Djibouti’s Chinese Debt

Djibouti's Minister of Foreign Affairs and International Cooperation Mahamoud Ali Youssouf (R) welcomes China's Foreign Minister Wang Yi upon his arrival at the diplomatic institute in Djibouti, on January 9, 2020. AFP

On July 15, 2019, Ilyas Moussa Dawaleh, Djibouti’s Minister of Economy and Finance, tweeted to announce that the restructuring of China’s ExIm Bank loan for the construction of the Djiboutian section of the Djibouti-Addis Ababa railway line would be completed even though “a few small details” remained to be settled. He was back in Beijing a month later, on August 7th, to discuss these details. The minister reports “high-quality exchanges”, but the atmosphere no longer seems to be festive, judging by the two photos he posts on Twitter where the three Djiboutian envoys (including him in the middle) have to face ten representatives of the ExIm Bank of China.

Djibouti Economy and Finance Minister Ilyas Moussa Dawaleh meeting with representatives from China’s ExIm Bank in Beijing on August 7, 2019. Photo via @Ilyasdawaleh.

Issued on October 23, 2019, an IMF report is a little more explicit about the situation, but its interpretation is not obvious, especially since it suggests that the renegotiation would not have been finalised. The Ethiopia-Djibouti railway project is a $4 billion project that Djibouti has had to finance to the tune of $550 million for the part built on its territory, both with its own funds ($58 million) and with a commercial loan of $492 million granted in 2013 by China’s ExIm Bank. Although the construction work is now complete, the line’s operation has so far been disappointing, both because of the uncertain supply of electricity and because of a shortage of products for export. The current low profitability of the project and the terms of the loan have resulted in a debt burden that Djibouti is finding it difficult to meet, hence the request to renegotiate the terms in the very year (2019) when the loan repayment is due to begin.

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