Ethiopia Approves $738M Loan Backed by Oil for Regional Highway to South Sudan

On 5 November 2024, Ethiopia announced that its Parliament has approved the financing to build a regional highway to enhance connectivity. Ethiopia will extend a USD 738 million loan to South Sudan for building its section of the road. On the other hand, South Sudan will supply Ethiopia with petroleum products.

“This strategic partnership not only strengthens diplomatic relations but also establishes a model for resource-backed financing in infrastructure projects across Africa.”

The regional highway is 220-km long and will provide landlocked South Sudan another access to the Indian Ocean via coastal state Djibouti. Previously, South Sudan could only access the sea via Kenya, with Juba being more than 1,700 km away from Mombasa.

The project will foster regional integration, boost trade and #P2P exchanges thanks to improved #connectivity. Having more routing options for import and export flows will contribute to alleviate any bottleneck.

“Our hope is to move together to help each other; this is what our people want to see. This is a strategic project that connects our people and serves their needs.”

South Sudan President Salva Kiir

The cooperation project agreement was inked in May 2023 and the ratification by the Ethiopian Parliament represents the final step after the review by the Council of Ministers. With Ethiopia providing the financing, the road construction will go to Ethiopian contractors.

The loan repayment will be effected with a mix of cash and kind, spread over a period of 10 years, including a 5-year grace period. The interest rate on the loan was negotiated and set at 4% per annum.

South Sudan will bolter its infrastructure and trade while Ethiopia will reinforce its #EnergySecurity. The cooperation model can perhaps serve as a model for intra-African partnership.