China Eximbank provides RMB 630 million government concessional loan for Malawi International Conference Centre and Business Hotel Project

Project narrative

On January 15, 2009, the Chinese Government and the Government of Malawi signed a preferential loan framework agreement. Then, on September 8, 2009, China Eximbank and the Government of Malawi signed an RMB 630 million government concessional loan (GCL) loan agreement [CHINA EXIMBANK GCL NO. (2009 26) TOTAL NO. (227)] for the Malawi International Conference Centre and Business Hotel Project. The loan included the following borrowing terms: a maturity of 20 years (final maturity date: September 21, 2029), a grace period of 5 years (first repayment date: March 21, 2015), an interest rate of 2%, a default (penalty) interest rate of 0%, a management fee of 1%, and a commitment fee of 0.75%. The borrower was expected to use the proceeds of the loan to finance a commercial contract [number SCG-CLL 001] between Shanghai Construction (Group) General Company and Malawi's Ministry of Transport, Public Works, and Housing, which was signed on December 19, 2008. The loan's principal amount outstanding was RMB 336,000,000 as of June 2023. As of 2022, the borrower expected to make principal repayments each year worth RMB 42,000,000 until 2029. The project supported the construction of the Bingu International Conference Centre, Presidential Hotel, and Presidential Villas in the capital city of Lilongwe. Construction activities included a 130-room business hotel, a 1,000-seat dining hall and 170,000-square meter presidential villas. Shanghai Construction (Group) General Company, which is also known as Shanghai Construction Group, was the contractor responsible for project implementation. Its work was overseen by the Malawi Ministry of Transport, Public Works & Housing. The groundbreaking ceremony took place on December 12, 2009. On April 3, 2012, the Chinese Government announced that it was ready to hand over the 1,500 seat International Conference Centre. On June 27, 2012, the Chinese Government officially handed over the Presidential Hotel, International Conference Centre and Presidential Villas to Government of Malawi. There are some indications that the China Eximbank loan for the Malawi International Conference Centre and Business Hotel Project has financially underperformed vis-a-vis the original expectations of the lender. In 2021, Malawi's Minister of Finance announced that ‘in 2020/21 FY, Government [of Malawi] requested temporary debt service suspension from bilateral creditors. This is in line with the Extended Debt Service Suspension Initiative (DSSI). The key feature of the Extended DSSI is that the repayment period of the principal and interest payments falling due between 1st January 2021 to 30th June 2021 will be made in five years with one-year grace period. This entails that in 2021/22 FY, the suspended debt service will be within the grace period.’ Then, in November 2022, the World Bank and the IMF judged the Government of Malawi’s external debt and overall public debt to be ‘in distress’—a downgrade from the previous World Bank-IMF Debt Sustainability Analysis (DSA). In July 2023 correspondence with AidData’s Executive Director, the Government of Malawi revealed that it was in negotiations with China Eximbank about rescheduling all of their loans with amounts outstanding. The Government of Malawi proposed principal payments worth RMB 61 million and interest payments worth RMB 26 million in 2023, interest payments worth RMB 26 million and principal payment deferrals in 2024 and 2025, RMB 50 million in principal and interest payments in 2026, RMB 90 million in principal and interest payments in 2027, RMB 89 million in principal and interest payments in 2028, RMB 88 million in principal and interest payments in 2029, RMB 87 million in principal and interest payments in 2030, RMB 86 million in principal and interest payments in 2031, and RMB 85 million in principal and interest payments in 2032. China Eximbank proposed principal payments worth RMB 61 million and interest payments worth RMB 26 million in 2023, interest payments worth RMB 26 million and principal payment deferrals in 2024 and 2025, RMB 148 million in principal and interest payments in 2026, RMB 299 million in principal and interest payments in 2027, RMB 294 million in principal and interest payments in 2028, RMB 228 million in principal and interest payments in 2029, RMB 121 million in principal and interest payments in 2030, RMB 101 million in principal and interest payments in 2031, and RMB 82 million in principal and interest payments in 2032. As of July 2023, a debt rescheduling deal had not yet been reached by the parties.