China Eximbank provides RMB 656 million government concessional loan for Beira-Machipanda (N6) Road Rehabilitation Project (Linked to Record ID#57336)

Project narrative

On November 15, 2013, China Eximbank and the Government of Mozambique signed a government concessional loan (GCL) agreement worth RMB 656,000,000 for the Beira-Machipanda (N6) Road Rehabilitation Project (captured via Record ID#31066). This loan (GCL) carried the following borrowing terms: a 20 year maturity, a 7 year grace period, and a 1% interest rate. Its first scheduled principal payment date is March 21, 2022 and its last scheduled principal payment (maturity) date was September 21, 2034. The loan's (principal) amount outstanding was $87,774,462 as of December 31, 2022. Then, on January 13, 2014, China Eximbank and the Government of Mozambique signed a preferential buyer’s credit (PBC) agreement worth $312,400,000 for the Beira-Machipanda (N6) Road Rehabilitation Project (captured via Record ID#57336). This loan (PGC) carried the following borrowing terms: a 20 year maturity, a 7 year grace period, and a 1.5% interest rate. Its first scheduled principal payment date is January 21, 2022 and its last scheduled principal payment (maturity) date was July 21, 2034. The loan's (principal) amount outstanding was $288,369,231 as of December 31, 2022. The proceeds of the GCL and the PBC were to be used by the borrower to finance a commercial contract between Anhui Foreign Economic Construction Group Co., Ltd. (AFECC) and Mozambique's National Roads Administration, which was signed on March 27, 2012. The $416.5 million project involved the upgrading and rehabilitation of an 288 km road from Beira to Machipanda and a bridge that was constructed over the River Pungue. The completion of the project was expected to shorten the journey from the western border of Mozambique to the port of Beira from 7 hours to 4 hours, thereby facilitating regional connectivity, stimulating the development of agriculture, tourism and other industries along the route, and promoting exports. AFECC was the contractor responsible for implementation. A formal groundbreaking ceremony was held on July 10, 2014. However, construction did not begin until April 1, 2015. The project was originally scheduled for completion on March 31, 2018. However, it was ultimately completed and National Highway No. 6 was opened to traffic on November 14, 2019. The collection of tolls commenced on January 1, 2020. There are some indications that the China Eximbank loan for the Beira-Machipanda (N6) Road Rehabilitation Project may have financially underperformed vis-a-vis the original expectations of the lender. In 2016, several credit rating agencies downgraded the Government of Mozambique to 'selective default' or 'restricted default' status, and the World Bank and the IMF re-classified Mozambique's external debt as 'in distress.' In January 2017, the Government of Mozambique defaulted on a coupon payment for its dollar-denominated Eurobond. Then, in February 2018, the International Monetary Fund (IMF) announced that the Government of Mozambique had accumulated $710 million in arrears to external creditors and had agreed to reschedule some bilateral debt service payments with the Chinese Government. Two months later, in April 2018, Stelia Neta, a National Director at the Ministry of Finance of Mozambique revealed that the Government of Mozambique’s outstanding debt obligations to the Chinese Government amounted to $2.02 billion and the Chinese Government had agreed to extend the grace periods (and first principal repayments) on these outstanding debt obligations without changing their final maturity dates or interest rates (as captured via Record ID#66283).