China Eximbank provides $29.26 million preferential buyer’s credit for Pakbeng Mekong Bridge Project

Project narrative

In 2010, China Eximbank and the Government of Laos signed a $29.26 million preferential buyer’s credit (PBC) agreement for the Pakbeng Mekong Bridge Project. The loan’s estimated borrowing terms included a 20.0281-year maturity, a 7.2533-year grace period, and a 2.0702% interest rate. The loan proceeds were to be used by the borrower to finance 95% of the cost of a $30.8 million commercial (EPC) contract with China Road and Bridge Corporation (CRBC). The project involved the construction of the 379 meter long and 13 meter wide Pakbeng Mekong River Bridge (with 1.5 meter sidewalks on both sides, a reinforced concrete continuous beam structure, and a bridge approach that is 321 meters long) in the district of Pakbeng. The purpose of this two-way two-lane bridge — with a designed driving speed of 60km/hour — was to connect Oudomxay Province and Xaiyabuli (Sainyabuli) Province. The bridge is also an important overland connection point between Yunnan, China and Northern Thailand via Laos. The bridge links National Road No. 2W and No. 2E and facilitates the transportation of goods between the two provinces and other northern neighboring countries. CRBC was the EPC contractor responsible for implementation. A foundation stone laying and project commencement ceremony took place on December 23, 2012. The originally anticipated project completion date was March 22, 2015. The project passed final inspection on February 29, 2016. The bridge was was formally completed and opened to traffic on March 5, 2016. Then, the Lao Ministry of Transport issued a final project handover certificate on March 29, 2017. Upon completion, the bridge replaced a ferry service across the Mekong River. There are multiple indications that the China Eximbank loan for this project may have financially underperformed vis-a-vis the original expectations of the lender. In 2020, the Laotian authorities urgently sought debt relief from China Eximbank. At that time, the gross reserves of the Bank of Laos stood at only 1.5 months of import cover and credit rating agencies warned of a high default probability. In 2020, China Eximbank also agreed to reprofile multiple loan agreements that it had previously signed with the Government of Laos (as captured via Record ID#96464). These debt service payment deferrals lasted for approximately 4 years (2020 and 2023) and provided approximately $1.892 billion of cash flow relief ($1.422 billion in deferred principal payments and $470 million in deferred interest payments). Deferred principal and interest repayments in 2020 were worth $202 million. Deferred principal and interest payments were worth $426 million in 2021. Deferred principal and interest payments were worth $594 million in 2022. Deferred principal and interest payments were worth $670 million in 2023.