China Eximbank provides RMB 350 million government concessional loan for Cameroon Telecommunications CDMA Project (Linked to Record ID#31230 and ID#91746)

Project narrative

On January 31, 2007, the Chinese Government and the Government of Cameroon signed a preferential loan framework agreement for the Cameroon Telecommunications CDMA Project. On the same day, China Eximbank and the Government of the Republic of Cameroon signed an RMB 350 million (CFA 29 billion) government concessional loan (GCL) loan agreement [CHINA EXIMBANK GCL NO. 5 (2007) TOTAL NO. (176)] for the Cameroon Telecommunications CDMA Project. The GCL carries the following borrowing terms: a maturity of 20 years, a grace period of 5 years, an interest rate of 2%, a 0% default (penalty) interest rate, a 0.3% commitment fee, and a 0.3% management fee. The proceeds of the loan were on-lent by the Government of the Republic of Cameroon to CAMTEL (a state-owned telecommunications and Internet service provider in Cameroon). CAMTEL, as the ‘end-user’ and ultimate borrower, was expected to use the proceeds of the loan to finance a commercial contract (ID# 2006/025/GG/DG/CPM-AG/CAMTEL) between CAMTEL and from Huawei Technologies Co. Ltd., which was signed on April 11, 2006. As of December 31, 2020, the CFA 29 billion loan had achieved a 100% disbursement rate and its outstanding amount was equivalent to CFA 13.2 billion. Its outstanding amount was equivalent to CFA 20 billion as of December 31, 2016, CFA 17 billion as of December 31, 2017, CFA 15 billion as of December 31, 2018, and CFA 14 billion as of December 31, 2019. The purpose of the project was to enable CAMTEL’s acquisition of wireless (CDMA) phone technology and facilitate the installation of 350,000 CDMA lines. Huawei Technologies Co. Ltd. was the contractor responsible for implementation. Several sources that this project reached implementation, but it precise implementation start and end dates are unknown. Following trials with 10,000 lines in Yaounde and Douala in 2004, CAMTEL launched a Code Division Multiple Access (CDMA)-based wireless network in September 2005, under the brand name CTPhone, to complement its fixed-line network. Huawei Technologies Co. Ltd. supplied 20,000 lines in a first phase, which was later expanded to cover some other towns in the south and west of the country. Uptake was reportedly good, with around 28,000 customers signing up within the first year of operation (representing 20% of CAMTEL’s total fixed subscriber base). There are some indications that the China Eximbank loan for the Cameroon Telecommunications CDMA Project may have financially underperformed vis-a-vis the original expectations of the lender. In January 2019, Cameroon unilaterally withheld debt service payments to China Eximbank. The lender responded by withholding new loan disbursements. Then, in July 2019, China Eximbank and the Government of Cameroon signed a debt rescheduling agreement (as captured via Record ID#88213). Under the terms of the agreement, China Eximbank agreed to reschedule 18 loans previously contracted by the Government of Cameroon — with scheduled principal repayments between July 2019 and March 2022 — by allowing the borrower to defer scheduled principal repayments between July 2019 and March 2022 to later dates but without any maturity extensions. The total amount of restructured debt was equivalent CFA 148 billion ($253 million) — or 70% of the loan principal that was scheduled for repayment between July 2019 and March 2022. Under the terms of the agreement, the Government of Cameroon agreed to repay 30% of the loan principal according to the original July 2019-March 2022 schedule (i.e. without any payment deferrals). The lender and the borrower also agreed to cancel the committed but undisbursed loan balances worth approximately CFA 10 billion (for certain loans with disbursement deadlines that had already passed). Then, in January 2020, the International Monetary Fund (IMF) classified the Government Cameroon as facing a high risk of debt distress. Eighteen months later, during an address before Cameroon’s National Assembly on June 28, 2021, the Minister of Water and Energy (MINEE) Gaston Eloundou Esommba provided an update on the ICBC-financed Bini à Warak Hydroelectric Power Plant Project. He noted that the project had been 'on hold' since November 2019 because ICBC suspended the loan agreement, even though the Government of Cameroon had already mobilized XAF 22 billion of counterpart funding. He also explained that 'the reason for this suspension is that Cameroon did not settle some of its debts towards China on time, so, it is in a cross-default situation.’