When it was inaugurated in 2015, the Addis Ababa Light Rail was heralded as a banner project of China’s Belt and Road Initiative. By then, China had become known for its infrastructure feats at home. And many at the time said it was exporting “China speed” to the world: delivering public goods to underdeveloped countries like Ethiopia with unparalleled scale and efficiency.
But more than seven years after its launch, the Addis Ababa Light Rail continues to face severe operational issues. More than half of its rolling stock is unusable. The rail line, which connects the teeming metropolis with its suburbs, now symbolizes the Belt and Road’s bloat and sustainability challenges.
The Addis Ababa Light Rail’s Travails
According to The Reporter, an Ethiopian news outlet, 23 out of the Addis Ababa Light Rail system’s 40 trains are inoperable due to the lack of spare parts. The parts, totaling $60 million in cost, according to The Reporter, must be imported from China. But Ethiopia is facing a cash crunch as foreign exchange reserves have been depleted to less than a month of import cover.
Maintainance of rolling stock has been a challenge. For years, much of the light rail’s fleet has been out of service. With fewer trains running, ridership has been in decline, though trains are packed beyond capacity. The rail tracks have also been damaged by theft and vandalism.
There’s no doubt Addis Ababa needs more public transportation. It’s the largest city in Africa’s second most populous country. Investing in public transportation, in general, is a good use of public resources. It expands mobility options for the poor and the middle class. Mass transit is also better for the environment compared to single-passenger vehicles jamming freeways.
But can Ethiopia afford the light rail service? It doesn’t look like it.
Ethiopia must not only service debt for the line’s construction — it was built by a Chinese state-owned company, the China Railway Group, with a $475 million loan from China Ex-Im Bank — but it also must subsidize its operations. Passenger fares are insufficient to generate the necessary revenue to cover operating costs.
Subsidies are not uncommon with public transportation. But they are more sustainable in countries with large tax bases. Ethiopia’s tax-to-GDP ratio was 6 percent in 2020, according to the World Bank.
According to The Reporter, the light rail system generated $11.1 million in revenue in its first four years of operation but cost $154 million to operate. As a result, Ethiopia has often missed payments for repaying the project’s loan. Without skills transfer and improvements in governance, countries like Ethiopia will struggle to afford debt-financed new infrastructure built and maintained by more expensive foreign labor using imported parts and materials.
The “China model” — at least in terms of the Belt and Road’s first phase — doesn’t work. And that’s why Belt and Road spending has declined precipitously. In 2016, Chinese overseas development financing commitments soared to $87 billion in 2016. By 2021, it fell to a mere $3.7 billion.
Ethiopia Remains a Strategic Partner of China in Africa
China has a longstanding, strategic partnership with Ethiopia. In January, China’s new foreign minister, Qin Gang, visited Ethiopia on his first foreign tour, reflecting the country’s importance on the continent. Ethiopia is a major military power in Africa. It hosts the African Union headquarters. And it is projected to rank among the world’s ten most populous countries in 2050.
Also large in size is Ethiopia’s debt to China, its largest creditor. From 2000 to 2020, China provided $13.7 billion in loans to Ethiopia, according to the Boston University Global Development Policy Center. These loans are spread across sectors. They include other transportation projects like the Standard Gauge Railway, which has experienced similar challenges as the light rail, as well as a host of electric power and telecommunications projects. Chinese private sector companies have also built factories in Ethiopia, with some seeing it as a potential manufacturing hub in East Africa.
It may be that Ethiopia’s close strategic relationship with China yields more concessions on debt. (Ethiopia is among the many developing countries pursuing debt relief under the Common Framework of the G-20.)
During Foreign Minister Qin’s visit in January, the two countries signed a debt forgiveness agreement. China prefers to deal with these issues discretely, so the amount has not been publicly disclosed. In 2018, China agreed to reprofile Ethiopia’s debt for the Standard Gauge Railway, extending its repayment period from 15 to 30 years. It may have to do the same with the Addis Ababa Light Rail.