China Eximbank provides RMB 399 million government concessional loan for MA-60 Aircraft Acquisition Project (Linked to Project ID#98029, 96221)

In 2009, China Eximbank and Myanmar Foreign Trade Bank (MFTB) signed an RMB 399 million government concessional loan (GCL) agreement for the MA-60 Aircraft Acquisition Project. The GCL carries a maturity of 20 years (with a final maturity date of 2029). Its interest rate and grace period are unknown. The Government of Myanmar on-lent the proceeds of the GCL to Myanmar National Airlines. The proceeds of the GCL were to be used by the borrower to finance a commercial contract between Myanmar National Airlines and China National Aero-Technology Import & Export Corporation (CATIC), which was signed in December 2009. As of December 31, 2018, the loan's amount outstanding was RMB 375.406 million. The purpose of the project was to acquire three MA-60 aircraft for Myanmar National Airlines. CATIC was the contractor responsible for project implementation. The aircraft were successfully delivered in late September 2010. However, there are some indications that the China Eximbank loan for the MA-60 Aircraft Acquisition Project may have financially underperformed vis-a-vis the original expectations of the lender. After a string of accidents, two of the aircraft, XY-AIP (msn 807) and XY-AIQ (msn 808), were withdrawn from service in 2013. According to U Kyaw Mo, the Deputy Minister of Myanmar's Ministry of Transport and Communications, the third aircraft, XY-AIO (msn 806), was grounded in 2013 'as it was not fit to fly'. Myanmar National Airlines also failed to generate sufficient revenue to facilitate loan repayment, so the central government had to assume responsibility for its loan repayment obligations. Then, in 2020, China Eximbank and the Government of Myanmar signed a debt suspension agreement as part of the G-20 Debt Service Suspension Initiative (DSSI). Under the terms of the agreement, the lender agreed to suspend principal and interest payments due between May 1, 2020 and December 31, 2020 under 3 buyer’s credit loan (BCL) agreements, 6 government concessional loan (GCL) agreements, and 27 preferential buyer’s credit (PBC) agreements (as captured via Project ID#98029). Debt service payments under many of these loan agreements were again deferred in 2021 (as captured via Project ID#96221).

Additional details

1. The Burmese project title is ေလယာဥ္သုံးစင္း၀ယ္ယူေရး. 2. The China Eximbank loan that supported this project is not included in the Overseas Development Finance Dataset that Boston University’s Global Development Policy Center published in December 2020. 3. Myanmar National Airlines, formerly Union of Burma Airways, Burma Airways, and Myanmar Airways, is a state-owned airline and the flag carrier of Myanmar, based in Yangon. 4. According to the World Bank's Debtor Reporting System (DRS), the weighted average grace period of all official sector lending from Chinese creditors to government and government-guaranteed borrowing institutions in Myanmar was 6.0074 years in 2009. AidData estimates the grace period of the China Eximbank loan that supported the MA-60 Aircraft Acquisition Project by using this figure. See https://www.dropbox.com/s/949n5rctiue6d7c/IDS_Average_grace_period_and_maturity_on_new_external_debt_commitments.xlsx?dl=0 5. According to the World Bank's Debtor Reporting System (DRS), the weighted average interest rate of all official sector lending from Chinese creditors to government and government-guaranteed borrowing institutions in Myanmar was 3.9534% in 2009. AidData estimates the interest rate of the China Eximbank loan that supported the MA-60 Aircraft Acquisition Project by using this figure. See https://www.dropbox.com/s/ab8qt4n6jijcbhd/IDS_Average%20interest%20on%20new%20external%20debt%20commitments.xlsx?dl=0

Number of official sources

1

Number of total sources

17