- Ethiopia is negotiating with China to convert its $5.38 billion worth of loans from US dollars to the Chinese yuan.
- Converting to yuan could strengthen Ethiopia’s local currency in foreign exchange markets.
- Eyob Tekalign, Ethiopia’s central bank governor, confirmed official requests and ongoing discussions for the currency swap.
- China has not yet responded to the request, but approval by the People’s Bank of China seems possible.
- This move aligns with broader trends in BRICS countries favoring local currencies over the US dollar for loan repayments.
Ethiopia is currently in talks with China to convert its $5.38 billion in loans from US dollar denominations to the Chinese yuan. This negotiation aims to allow Ethiopia to repay its debt using yuan-based loans, potentially benefiting the Ethiopian currency’s position in Forex markets.
According to Eyob Tekalign, Ethiopia’s central bank governor, the discussions involve arrangements for a currency swap. He noted that settling loans in yuan rather than dollars could save Ethiopia millions of dollars in foreign exchange costs, as paying in US dollars remains expensive.
“China is a very important partner for us now, there is growing volume of trade and investment,” said Tekalign. “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 then working on it.” He added that the country is enthusiastic about the potential savings but is still in early discussion stages.
While China has not yet formally responded, the People’s Bank of China (PBOC) is likely to approve the request. The move fits China’s broader strategy to internationalize the yuan and enhance its use in global settlements. Similar initiatives by other BRICS members, like India, have led to substantial savings in foreign exchange—for example, India reportedly saved nearly $7 billion by purchasing oil in local currencies.
If more BRICS nations follow this trend of converting US dollar loans to yuan payments, it could weaken the US dollar’s dominant role in international finance, leading to a more multipolar currency environment.
For further details, see the article on Ethiopia in talks with China to convert dollar loans into yuan.
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