Ethiopia in talks with China to convert dollar debt into Yuan loans

Ethiopian officials have announced that the country is negotiating a currency swap agreement with China aimed at converting part of its $5.38 billion debt to Beijing into yuan-denominated loans — a move intended to ease foreign-exchange pressures and strengthen trade ties.

National Bank of Ethiopia governor Eyob Tekalign confirmed that discussions were held last month in Beijing with the Export-Import Bank of China and the People’s Bank of China. The talks focused on trade facilitation, payments, and debt restructuring. “China is a very important partner for us now,” Eyob told Bloomberg, adding that a currency swap “makes sense” for both nations and that Ethiopia had officially submitted its request.

The initiative mirrors recent steps by other African economies to reduce dependence on the US dollar. Kenya recently converted three Chinese-funded railway loans from dollars to yuan, a move expected to save $215 million annually in interest payments. Similarly, Nigeria renewed its 15 billion yuan ($2 billion) swap deal with Beijing late last year to boost naira–yuan settlements.

Ethiopia has faced major economic setbacks due to the COVID-19 pandemic and a devastating two-year civil war in Tigray, which ended in 2022. The nation defaulted on its $1 billion eurobond in December 2023 but has since reached a $3.5 billion relief agreement with official creditors under the G20 Common Framework, co-chaired by France and China.

Finance Minister Ahmed Shide said last month that Addis Ababa and Beijing had agreed in principle to a birr-yuan swap mechanism to support post-war reconstruction and diversify global partnerships. Ethiopia formally joined BRICS in January 2024, aligning with the bloc’s broader campaign to promote local-currency settlements and reduce reliance on the US dollar — a policy that has drawn criticism from Washington and threats of tariffs from President Donald Trump.