Africa-Press – Ethiopia. October 21, 2025 3 minutes read Addis Abeba – Ethiopia has begun negotiations with China to convert a portion of its $5.38 billion debt to yuan-denominated loans, following Kenya’s recent move to diversify away from the U.S. dollar and support China’s push to internationalize its currency.
National Bank of Ethiopia (NBE) Governor Eyob Tekalign (PhD) said discussions are underway with the Export-Import Bank of China and the People’s Bank of China (PBC) for a potential currency swap. He disclosed the talks during an interview with Bloomberg on 17 October in Washington, D.C., where he attended the International Monetary Fund (IMF) annual meetings.
“China is a very important partner for us now; there is growing volume of trade and investment,” Eyob said. “So it really makes sense to arrange some currency swap, but in terms of converting these things as well. So absolutely, this is something in the making – we’ve requested officially and are working on it.”
The PBC has not responded to Bloomberg’s request for comment.
Ethiopia’s debt talks come amid prolonged financial uncertainty. The government announced last week that negotiations with bondholders had stalled due to disagreements over key terms, according to a Reuters report on October 14. Ethiopia defaulted on its only international bond in late 2023 after seeking debt relief under the G20 Common Framework. Despite the deadlock, authorities said “substantial progress” had been achieved and expressed optimism that discussions would resume “in the foreseeable future.”
After his appointment as Governor of the National Bank of Ethiopia (NBE), Eyob Tekalign (PhD) made China his first official overseas destination. On 22 September, Addis Standard reported that a high-level Ethiopian delegation led by Eyob was visiting China to advance debt restructuring talks and strengthen economic cooperation.
According to the report, the visit builds on the recently concluded debt restructuring agreement with the Official Creditor Committee, co-chaired by China and France, and seeks to accelerate Ethiopia’s ongoing restructuring process.
Bloomberg noted that Ethiopia’s proposed shift adds to a growing number of countries, including Sri Lanka, Hungary, and Kenya, that are turning to the yuan for cheaper financing. While the U.S. dollar remains dominant, China’s currency is increasingly being used in international transactions as Beijing seeks to expand the yuan’s global role.
Kenya’s deal, signed last month, is expected to save the country around $215 million annually in interest payments.
“There are savings in this,” Eyob said, declining to disclose how much debt might be converted. “We’re very enthusiastic about this discussion, but it’s still at an early stage.”
IMF Africa Department Director Abebe Aemro Selassie described such arrangements as potentially beneficial, especially for nations where China holds a major share of external debt.
“My sense is that it’s going to yield nontrivial savings,” Abebe said in an interview. “To the extent that it does that over the course of the loan that has to be amortized, then it will be positive for countries like Kenya and others that may want to do it.”
Despite ongoing debt challenges, Ethiopia’s bonds recently rallied to their highest level since 2021.
“We’ve had a very difficult conversation, but I don’t call it an impasse – I call it progress,” Eyob said. “I’m really optimistic. I think we should be able – next time we restart this – to close.”
During the recent World Bank and IMF Annual Meetings, Eyob also held bilateral talks with PBC Governor Pan Gongsheng on strengthening financial cooperation between Ethiopia and China. Local media reported that discussions focused on debt restructuring and enhancing cross-border trade relations.
Both central bank governors agreed to deepen collaboration between financial institutions in the two countries to boost trade and investment flows. Eyob reaffirmed Ethiopia’s commitment to advancing its strategic partnership with China in line with the government’s ongoing economic reform program.
Last week, Addis Standard reported that Fitch Ratings affirmed Ethiopia’s Long-Term Foreign-Currency Issuer Default Rating at ‘Restricted Default (RD),’ citing continued default on its Eurobond and other commercial external debt. Fitch noted that the government is seeking to restructure about $15 billion in external debt and has made “notable progress” in macroeconomic reforms, including exchange rate liberalization and inflation control.
China, Ethiopia’s largest bilateral creditor, co-chairs the Official Creditor Committee overseeing the country’s restructuring under the G20 framework. The process, launched in 2021, aims to ensure long-term debt sustainability amid ongoing external payment pressures.
In July 2025, Ethiopia reached a memorandum of understanding with official creditors for $2.5 billion in debt relief through 2028, with bilateral agreements, including those with China, currently being finalized.
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