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

Project narrative

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 After a string of accidents, two of the aircraft, XY-AIP (msn 807) and XY-AIQ (msn 808), were withdrawn from service in 2013.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 Record ID#98029). Debt service payments under many of these loan agreements were again deferred in 2021 (as captured via Record ID#96221).