Ethiopia and China signed a $600 million agreement Tuesday to expand freight capacity and upgrade the Addis Ababa–Djibouti standard gauge railway, Ethiopian transport and finance officials said. The deal aims to boost the railway’s freight volume toward its designed capacity, reduce logistics costs, and improve access to the Port of Doraleh, supporting Ethiopia’s export-oriented growth strategy.
The $600 million agreement, signed Tuesday by Ethiopian and Chinese authorities, targets extensive upgrades and capacity expansion along the 752-kilometer Addis Ababa–Djibouti standard gauge railway, according to Ethiopian transport and finance officials. The railway, jointly operated by the Ethio–Djibouti Standard Gauge Railway Share Company (EDR), links Ethiopia’s capital to Djibouti’s Port of Doraleh and serves as the landlocked country’s primary gateway to maritime trade. The deal is part of broader infrastructure cooperation under the Ethiopia–China partnership, which has prioritized rail, road, and industrial park development to support Ethiopia’s export-oriented growth strategy.
Freight traffic on the corridor reportedly reached only about 3.2 million tonnes in 2025, well below the 6 million tonnes forecast for that year, underscoring logistical constraints that the expansion seeks to alleviate.
The funding package is intended to finance infrastructure improvements, procurement of additional locomotives and rolling stock, and enhancements to connectivity between industrial parks near Addis Ababa and the main railway line, officials said. These measures aim to raise the railway’s freight volume closer to its designed capacity of roughly 20 to 25 million tonnes per year, addressing the current under-utilization and operational bottlenecks.
The Addis Ababa–Djibouti Railway, inaugurated for full commercial operations on January 1, 2018, is Africa’s first electrified cross-border railway of this scale. Constructed by China Railway Engineering Corporation (CREC) and China Civil Engineering Construction Corporation (CCECC), the 752-kilometer corridor has a gross transport capacity of nearly 25 million tonnes annually, factoring in double-track sections. However, infrastructure linking the railway to the Port of Doraleh was not fully completed at commissioning, limiting annual cargo-handling capacity to around 6 million tonnes, with plans to increase this to 14 million tonnes over time through ongoing upgrades.
The agreement also includes a five-year technical consultancy deal between CCECC and EDR, effective January 2026, aimed at improving operational efficiency and sustainable management of the railway, sources confirmed. This consultancy arrangement highlights China’s continued involvement beyond construction, supporting capacity expansion and operational reforms within the state-owned governance framework overseen by the Ethiopian Railway Corporation (ERC) and EDR.
Officials emphasized that the expansion will reduce Ethiopia’s high logistics costs by shifting freight from road to rail, improving access to the Port of Doraleh, and facilitating export flows from industrial zones that rely on the corridor. The program includes construction of branch or connector lines to link industrial parks on the outskirts of Addis Ababa directly to the main railway, creating last-mile rail connections for freight origin points rather than relying solely on road transport.
China remains Ethiopia’s leading infrastructure partner, with previous funding for the Addis Ababa–Djibouti Railway totaling approximately $3.7 billion, about 70% of which was financed through Chinese loans, according to official and media reports. The new $600 million package adds to this existing portfolio of Chinese-backed rail finance and focuses on modernization rather than new line construction. Chinese policy banks and state-linked construction firms have played central roles in Ethiopia’s railway, road, and industrial park projects since 2008, according to overseas development finance data.
The Addis Ababa–Djibouti line is a critical regional trade artery, providing the majority of Ethiopia’s imports and exports with direct rail access to the sea. Ethiopian officials have described the railway as significantly reducing transit times from a three-day road journey to roughly ten hours by rail. The expansion aligns with Ethiopia’s policy to diversify transport modes and reduce reliance on more costly and congested road freight. For China, the project supports Belt and Road connectivity objectives, strengthening commercial links with Ethiopia and showcasing Chinese railway technology and financing in Africa.
The deal further consolidates Ethiopia–China relations through 2024 and beyond, encompassing infrastructure, trade, technology, and cultural exchanges. The Addis Ababa–Djibouti Railway remains one of the most prominent symbols of this multifaceted partnership, with ongoing upgrades and operational improvements expected to bolster Ethiopia’s regional trade role in the Horn of Africa.
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