Ethiopia has begun negotiations with China to convert part of its debt into the Chinese Yuan. This initiative aims to ease the country’s foreign exchange shortage while aligning with the BRICS bloc’s broader agenda to reduce global reliance on the U.S. Dollar.

According to a report by Russia Today, Addis Ababa hopes this policy will help rebuild its economy after years of severe instability. The country has started talks to convert part of its total debt to Beijing—amounting to US$ 5.38 billion (approximately Rp 88.77 trillion)—into Yuan-denominated obligations.

The Governor of the National Bank of Ethiopia, Eyob Tekalign, stated that the central bank held discussions in Beijing last month with both the Export-Import Bank of China and the People’s Bank of China. The talks focused on payment mechanisms, trade facilitation, and debt restructuring.

“China is now a very important partner for us... It makes perfect sense to establish certain currency exchange arrangements. We have officially requested this and are currently working on it,” Tekalign said on Friday (October 17, 2025) following the International Monetary Fund (IMF) Annual Meeting in Washington.

Ethiopia’s move follows a similar initiative taken by Kenya, where the government in Nairobi recently converted three Chinese-financed railway loans from U.S. Dollar denomination to the Yuan. According to Kenya’s Ministry of Finance, the conversion is expected to reduce annual interest costs by about US$ 215 million (approximately Rp 3.55 trillion).

In addition, Nigeria renewed its currency swap agreement with the People’s Bank of China last December, valued at 15 billion Yuan (roughly US$ 2 billion or Rp 33 trillion), to facilitate trade settlements between the Naira and Yuan.

Ethiopia officially joined the BRICS economic bloc in January 2024, alongside Egypt, Iran, the United Arab Emirates, and Indonesia. The group has been actively promoting local currency trade settlements as part of a broader effort to reduce dependence on the U.S. Dollar. However, the initiative has been criticized by U.S. President Donald Trump, who has threatened to impose retaliatory tariffs and sanctions.

Economically, Addis Ababa remains under intense pressure due to the combined impact of the COVID-19 pandemic and a two-year civil war in the northern Tigray region, which ended in 2022. The country defaulted on its only international bond, worth US$ 1 billion (around Rp 16.5 trillion), in December last year.

Meanwhile, Ethiopia has formalized a debt relief agreement with official creditors under the G20 Common Framework, jointly led by France and China. The deal provides the country with over US$ 3.5 billion (approximately Rp 57.75 trillion) in cash flow relief.