China Eximbank provides $50 million loan for Zambezi Valley Agricultural Processing Plant Project

On February 23, 2009, China Eximbank and the Government of Mozambique signed a $50 million loan agreement for the Zambezi Valley Agricultural Processing Plant Project. The borrowing terms are unknown. $30 million of the loan proceeds were used to build a cotton processing plant in Guro district within Manica Province, a rice processing factory in Namacurra district within Zambezia Province, and a maize (cornmeal) processing factory in the town of Ulonguè within Angónia district and Tete Province. $20 million of the loan proceeds were designated for the acquisition of Chinese agricultural equipment and machinery, including tractors, rotovators and trucks. This equipment was subsequently sold by SOVALE, a company in which the Zambezi Valley Planning and Development Office (GPZ) and SOGIR (a company partly owned by GPZ) hold equity stakes. The ultimate objective of this project was to improve agricultural production by local farmers. China CAMC Engineering Co., Ltd. and Beijing Urban Construction Group Co., Ltd. were the contractors responsible for implementation. A groundbreaking ceremony for this project was held on November 10, 2010. In August, 2012, the project was completed as planned. There are some indications that the China Eximbank loan for the Zambezi Valley Agricultural Processing Plant 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 Project ID#66283).

Additional details

1. The Chinese project title is 莫桑比克农业加工项目 or 莫桑比克赞比西河谷农业机械及农产品加工成套设备出口项目.

Number of official sources

8

Number of total sources

17