China Eximbank provides RMB 513 million government concessional loan for the Cameroon Backbone Expansion Project (Linked to Record ID#201)

Project narrative

On November 4, 2014, the Chinese Government and the Cameroonian Government signed a framework agreement for the provision of a concessional loan for Phase 3 of the Cameroon Fiber Optic Transmission Backbone Project (also known as 施光纤骨干网扩容项目). Then, on January 22, 2015, China Eximbank and the Cameroon Ministry of Planning, Economy and Regional Development (MINEPAT) signed an RMB 513 million (CFA 43 billion) government concessional loan (GCL) agreement [CHINA EXIMBANK GCL NO. (2014) 28 TOTAL NO. (531)] for Phase 3 of the Cameroon Fiber Optic Transmission Backbone Project. The borrowing terms of the GCL were as follows: a 20-year maturity, a 5-year grace period, a 2% interest rate, a 0% default (penalty) interest rate, a 0.25% commitment fee, and a 0.25% management fee. MINEPAT then on-lent the proceeds of the loan to Cameroon’s state-owned telecoms operator, CamTel, which in turn used the proceeds of the loan to finance a commercial contract with Huawei Technologies Co., Ltd (that was signed on January 17, 2013 and amended on December 17, 2013). As of December 31, 2020, the loan had achieved a 100% disbursement rate and its outstanding amount was equivalent to CFA 41.7 billion. Its outstanding amount was equivalent to CFA 42 billion as of December 31, 2016, CFA 41 billion as of December 31, 2017, CFA 43 billion as of December 31, 2018, and CFA 43 billion as of December 31, 2019. Phase 3 involved laying 3,950 kilometers of fiber optic cable in Cameroon. The Cameroon Fiber Optic Transmission Backbone Project was implemented in 3 phases. The first phase (captured via Project#201) started in 2009 and ended in 2011. The second phase, which involved laying of 3,200 kilometers of fiber optic cable in the northern part of Cameroon (Maroua), started in 2011 and ended in 2013. The third phase (captured via Record ID#36246) began in February 2015 and was completed in 2017. As of 2017, about 12,000 kilometers of fiber cables had been laid across Cameroon, but the project was still in progress as the government wants at least 20,000 kilometers of fiber cables around Cameroon (FOSMN). There are some indications that the China Eximbank loan for the Cameroon Backbone Expansion Project may have financially underperformed vis-a-vis the original expectations of the lender. In January 2019, Cameroon unilaterally withheld debt service payments to China Eximbank. The lender responded by withholding new loan disbursements. Then, in July 2019, China Eximbank and the Government of Cameroon signed a debt rescheduling agreement (as captured via Record ID#88213). Under the terms of the agreement, China Eximbank agreed to reschedule 18 loans previously contracted by the Government of Cameroon — with scheduled principal repayments between July 2019 and March 2022 — by allowing the borrower to defer scheduled principal repayments between July 2019 and March 2022 to later dates but without any maturity extensions. The total amount of restructured debt was equivalent CFA 148 billion ($253 million) — or 70% of the loan principal that was scheduled for repayment between July 2019 and March 2022. Under the terms of the agreement, the Government of Cameroon agreed to repay 30% of the loan principal according to the original July 2019-March 2022 schedule (i.e. without any payment deferrals). The lender and the borrower also agreed to cancel the committed but undisbursed loan balances worth approximately CFA 10 billion (for certain loans with disbursement deadlines that had already passed). Then, in January 2020, the International Monetary Fund (IMF) classified the Government Cameroon as facing a high risk of debt distress. Eighteen months later, during an address before Cameroon’s National Assembly on June 28, 2021, the Minister of Water and Energy (MINEE) Gaston Eloundou Esommba provided an update on the ICBC-financed Bini à Warak Hydroelectric Power Plant Project. He noted that the project had been 'on hold' since November 2019 because ICBC suspended the loan agreement, even though the Government of Cameroon had already mobilized XAF 22 billion of counterpart funding. He also explained that 'the reason for this suspension is that Cameroon did not settle some of its debts towards China on time, so, it is in a cross-default situation.’