Ethiopian Parliament, during its extraordinary session last week, approved a 127-million-dollar loan agreement with the Korea EXIM bank for the Gore-Tepi road connectivity improvement project.
The poor condition non-paved road is planned to be upgraded to an asphalt concrete road at an average cost of nearly a million dollars a km.
This stands way behind the record high Melka Jebdu to Dire Dawa road project, which cost 63.5 million dollars a km.
While the Bank will hold back nine million dollars as a service charge, the remaining 30 million dollars will be financed by the government.
The whole loan is to be repaid in full in four decades, with an interest rate of 0.01pc.
Beginning the approval of the loan and first disbursement in three months’ time, the project is scheduled to be finalised in five years.
Preparation, including route selection, design and environmental impact assessment, was finalised a year ago.
Over the coming five years, two-thirds of the money will be allocated for construction, while the rest will be used for contract management and supervisory works.
Close to 20 million dollars is allocated for administrative costs, including management, tax and duties, and social and environmental mitigation measures.
The area, 600km south-west of the capital, is known for its virgin tropical forest.
It is an ecosystem comprising the wettest and most humid forests in the country in the south-eastern plateau known as the Harenna Forest.
Studies and environmental activists have been decrying about the deteriorating conditions of the forest.
The most striking changes in the forest coverage are caused by human activities in the form of timber extraction, coffee and tea plantations, agricultural expansion, human settlement and fire hazards.
ERA officials agree with the claim, and say the Authority has taken precautionary measures.
“We have completed a meticulous study on negative environmental impacts and taken mitigation measures to minimise them,” said Frew Bekele, Engineering Procurement team leader, without providing further details.
The new design mainly follows the gravel road route that has been there for the past 27 years.
Three decades back, the gravel road was constructed with a 65.6-million-dollar loan secured from the African Development Bank.
“Now the gravel road is in very bad condition,” Tessema Aba, a driver working for one of the NGOs active in the area, said. “It has now reached to a point where it becomes inaccessible during the rainy season.”
The planned two-lane road connecting two regions, Oromia and the Southern Nations, Nationalities and Peoples (SNNPR) region, is expected to improve the agricultural yields of cash crops like coffee and fruits.
“The current road though operational was never enough to have a positive impact on the commercial activities on agricultural products, as feeder roads were left unattained,” said Fikru Bonqa, member of Shaka Coffee Cooperatives.
The loan is a slice of a 500-million-dollar loan framework agreement made in May 2016, when South Korean President, Park Geun Hye, visited Ethiopia. The government signed an agreement with the Bank on May 26, 2016. Abulaziz Mohammed, Minister of Finance and Economic Cooperation (MoFEC), signed the agreement with Lee Duk-Hoon, chairman and president of the bank, in Addis Abeba.
The bank has a two-year history of funding the country’s road projects, since it signed a 100-million-dollar loan agreement with the country for the construction of the Modjo-Hawassa road, which extends from Meki to Ziway and is an extension of the Addis-Adama expressway. This loan will be paid back after 40 years.
The first time the bank funded a non-road project was in 2012, when it loaned 78.4 million dollars to finance the Sululta-Gebre Guracha power transmission project.
As of December 31, 2015, the external debt of the country stood at 19.96 billion Br, which is 55 pc of the total outstanding debt. During the same period, bilateral lenders disbursed 679 million dollars, out of which 2.7 million dollars was from the Paris club, which includes most of the western European and Scandinavian nations, while the lion’s share (99.8 pc) came from non-Paris club creditors – a category which includes the Exim bank of Korea and other Asian lenders. In comparison, international lenders, like the IMF and World Bank, disbursed 447.8 million dollars. From the beginning of December 2015, 44.2pc of external debt, totalling 537.76 million dollars, was disbursed to the development of infrastructure.
In this budget year, the Ethiopian Roads Authority (ERA) has an ambition to construct and rehabilitate 21,136km of roads across the country. A total of 28.7 billion Br has been allotted by the government for the coming three years for the road sector, of which 11 billion Br is planned to be secured from foreign aid. [Addis Fortune]