Narrative
Full Description
Project narrative
In August 2019, Equatorial Guinea’s Ministry of Finance and a local subsidiary of China Road and Bridge Corporation (CRBC) -- known as China Road and Bridge Corporation (G.E.) -- signed a $114,578,197.59 (CFA 67,426,633,981.00) loan agreement (memorandum of understanding) to clear payment arrears (i.e. settle overdue payments) under 13 construction contracts. The loan carried a 5% interest rate, a 1.416-year grace period (first principal and interest payment: December 31, 2021), and a maturity of 6.917 years (final maturity date: June 30, 2026). The borrower was responsible for making ten, consecutive, semi-annual principal and interest payments to the lender between December 31, 2021 and June 30, 2026. The borrower also agreed to mobilize the resources needed to meet its repayment obligations to CRBC by issuing a set of government bounds. The loan’s principal amount outstanding was $114,578,197.59 as of June 30, 2021.
Staff comments
1. The August 2019 loan agreement (memorandum of understanding) can be accessed in its entirety via https://www.dropbox.com/scl/fi/jva4hclpdmk2qu7eufhbz/Nuevo_borrador_del_MOU_de_la_emision_de_los_bonos.doc.pdf?rlkey=gfaw2dywfgjozzolh317eo47k&dl=0. 2. A list of the Government of Equatorial Guinea’s payment arrears to CRBC — under 13 construction contracts — can be accessed via https://www.dropbox.com/scl/fi/ysqv1rsogl69t7bacprtw/Nuevo-anexo.pdf?rlkey=43qwvvfm3gd88f3748j4pfmb0&dl=0. 3. There is some evidence (https://diariorombe.es/economia/guinea-ecuatorial-emite-bonos-del-estado-por-1146-millones-de-dolares-para-saldar-su-deuda-con-china-road-hasta-junio-de-2026/ ) that suggests that this loan may have been collateralized against a minimum cash balance (equivalent to one semi-annual principal and interest payment) in a deposit account at the Autonomous Fund of Equatorial Guinea’s Ministry of Finance. This issue warrants further investigation. 4. A September 2021 IMF report states that “the authorities […] have external arrears to a Chinese commercial entity with which they are in good faith discussions on a new repayment calendar. In particular, the authorities and their Chinese counterparts are engaged in negotiations to revise key parameters of the borrowing framework agreement. In 2021, the authorities already made two of three debt service payments to the Chinese commercial entity that had been outstanding at end-2020, and by end-2021, at the conclusion of the negotiations, the outstanding payment would be made to the Chinese commercial entity.’ It is unclear if the Chinese commercial entity in question is CRBC. This issue warrants further investigation.