Potash-for-loanPotash-for-loan
April 12, 2014
By Yohannes Anberbir and Yonas Abiye
The Ethiopian government has extended an invitation to Chinese companies to take part in the development of its considerable potash mineral reserve, a prospective sector attracting a number of
internationally known miners, as part of the potash-for-loan agreement the two countries signed in Addis Ababa on Wednesday.
The deal is to grant access to Chinese firms to enter into the country's potash mineral sector in exchange for infrastructural loans that Ethiopia needs to tap into if it is to sustain its massive railway and power generation projects. The agreement signed this week incorporated the potash-for-loan arrangement in addition to bilateral trade, financing and cooperation agreements in the area of industrial zone development and other infrastructure projects.
The two sides inked the agreement on the Eighth Session of the Ethio-China Joint Commission Meeting on Economic, Scientific and Technical Cooperation and Trade, held last week in Addis Ababa. According to information obtained from the Ministry of Finance and Economic Development (MoFED,) the agreement will enable the Ethiopian government to back loans that it took or will take in the future.
Currently, few companies and financial institutions are already in talks with the Ethiopian authorities on possibilities of joint development of the potash reserve, The Reporter learnt. Furthermore, the Chinese side is also evaluating the actual market worth of the country's potash reserve so that companies and financial institutions start negotiating on a 'package deal' incorporating both potash and finance for infrastructural development in Ethiopia.
The Ethiopian government on its part is considering to offer more details on the mineral potential and facilitate for Chinese companies to get utilization rights in a short amount of time. With an estimated 160 million tons reserve mostly located in the Northern Afar Regional State (the Danakil Depression), Ethiopian potash has thus far attracted big international miners like the Canadian Allana Potash, Anglo-Australian BHP Billiton and Norwegian Yara and although not in Ethiopia now, the Indian company, Sainik Potash.
Potash is not the first export commodity to be linked to an infrastructural loan that Chinese state-owned banks such as the EX-IM Bank of China are providing for Ethiopia. Previously, the Ethiopian government linked sesame export proceeds with debt servicing that it has to do with respect to China. Following that, all export of sesame was redirected through the Commercial Bank of Ethiopia to use the proceeds to service foreign currency nominated Chinese debt.
In a related news, MoFED officials told parliamentarians on Thursday that the government of Ethiopia has received disbursements of USD 8.3 billion from the total committed financial resources to the country both in the form of loans and grants in the past three years. Out of this amount, USD 6.4 billion was loans while grants take up the remaining balance.
Meanwhile, USD 297.2 million was spent to service part of the external debt that the country owed its foreign lenders.
In the latest report, MoFED says, “In the past three years, it has been mobilizing huge financial resources from bilateral and multilateral sources in the form of loans and grants.” According to MoFED, during the first three years of the GTP, the highest achievement of the commitment was secured from international financial institutions (multilateral sources.) The Ethio-China development cooperation and British Development Fund and the Department for International Development (DFID) were also some of the bilateral sources.
Out of the total amount of disbursement in the reported period, USD 3.2 billion (49 percent) came from multilateral sources, while the USD 2.5 billion (38.5 percent) was from bilateral sources excluding China. From the bilateral side, 46 percent of the disbursement came from DFID. In this time, the overall share of China from the stock of bilateral financial assistance is seen to appreciate continuously while the shares of the UN and the EU declined successively.
In relation to this, the report also indicated that some USD 36.2 million was secured in the form of debt relief.
https://www.thereporterethiopia.com/index.php/news-headlines/item/1856-potash-for-loan