[Wen/Observer Network Chen Sijia] According to a report by Bloomberg on October 20, Ethiopian Central Bank Governor Eyob Tekalign said when attending the International Monetary Fund (IMF) Annual Meeting in the United States on the 17th that Ethiopia is negotiating with China and hopes to convert some of the dollar-denominated loans into RMB loans.
Tekarion said that he visited China last month and discussed the issue of loan conversion with the Chinese side. He revealed: "This can save money. We are very enthusiastic about this discussion, but the negotiations are still in the early stages. Our dialogue is not easy, but I don't think we have reached a deadlock. I think progress has been made. I am very optimistic. I think when we start negotiations next time, we should be able to reach an agreement."
Ethiopia, which defaulted on its debt in 2023, has been negotiating with creditors to restructure about $15 billion in debt. According to IMF data, Ethiopia owes China US$5.38 billion, and Tkarien did not disclose how much debt the country is seeking to convert.
He said: “China is now our very important partner, and the scale of trade and investment is growing. Therefore, it makes sense to arrange a currency exchange mechanism and consider the conversion of debt.”
According to the website of the Ministry of Finance, on September 24, Vice Minister of Finance Liao Min met with Tekarien in Beijing, and the two sides exchanged views on China-Ethiopia financial cooperation, debt treatment and other issues.
Liu said that China's Ministry of Finance attaches great importance to cooperation with Ethiopia and is willing to continue to deepen exchanges in the financial field between the two sides and make a positive contribution to the continued development of China-Etiopia's all-weather strategic partnership.
Tekarien said that Ethiopia is grateful to China for its long-term valuable assistance to Ethiopia's economic development and improvement of people's livelihood, as well as its strong support in infrastructure and debt treatment. Ethiopia looks forward to maintaining close exchanges with China and deepening pragmatic cooperation between the two sides in financial and other fields.
Today, more and more African countries are starting to consider converting US-dollar Chinese loans into yuan loans.On October 7, local time, Kenya’s Minister of Finance and Economic Planning, John Mbadi, said that Kenya has converted three US-dollar Chinese railroad loans into yuan loans, saving about $2.15 billion a year.
Mr. Mbadi has pointed out that because China’s interest rates are lower than the U.S., conversion loans can save Kenya a bit of money, and extending the repayment period can also free up much-needed fiscal space.
In an interview with the media last week, Zambia's Finance Minister Situmbeko Musokotwane said that Zambia was "keenly watching" the relevant agreement in Kenya.
Lesetja Kganyago, governor of the Central Bank of South Africa, said on October 16 that converting existing US dollar loans into RMB loans with lower interest rates "is part of the grand strategy of promoting RMB internationalization".
Bloomberg noted that more countries would convert Chinese loans valued in U.S. dollars into RMB loans to promote the internationalization of the RMB. While the dollar debt market remains dominant, the position of the RMB in international trade is steadily rising as the use of the RMB in global trade financing increases and the unstable U.S. trade policies increase investor doubt about the U.S. dollar.
Ovigwe Eguegu, a policy analyst at New International Consulting, told the Hong Kong South China Morning Post that the trend of de-dollarization is driving a new people’s currency pricing ecosystem, which offers opportunities for African countries to diversify finance and reduce dollar risks, while also deepening Africa’s ties to China.
Eggu believes that more countries could follow after Kenya completed the loan conversion, “not only with regard to old loans, but also with regard to new loans, but also between China and other African countries.”