China Eximbank provides $140.5 million buyer's credit loan for 500 km Dalian III Road Rehabilitation Project (Linked to Record ID#36690, #55908, #55419, and #107028)

Project narrative

On February 22, 2008, the Government of Suriname signed a $140,500,000 buyer's credit loan (BCL) agreement with China Eximbank to finance 64% of the total cost of the 500 km Dalian III Road Rehabilitation Project (as captured via Record ID#36735). The BCL carried the following borrowing terms: a 5.52% interest rate, a 20 year maturity, and a 5.5 year grace period. Then, on November 21, 2008, China Eximbank and the Government of Suriname signed an RMB 400 million government concessional loan (GCL) agreement to the Government of Suriname for the 500 km Road Rehabilitation Project (as captured via Record ID#56053). The borrowing terms of the GCL were as follows: a 2% interest rate, a 20.3 year maturity, and a 5.3 year grace period. The proceeds of the BCL and GCL were to be used by the borrower to finance a $215 million commercial contract between China Dalian International Cooperation Co., Ltd. and Suriname's Ministry of Public Works, which was signed on December 6, 2007. The purpose of the project was to upgrade 500 km of roads in and around Paramaribo, Suriname. More specifically, the project sought to upgrade 250 km of municipal roads in the city of Paramaribo and 250 km of trunk roads outside the city of Paramaribo. The project scope included the paving of the 72.355 km Afobakka road and the paving of the 90 km Berg en Dal-Atjoni road; the paving of the Zanderij-Kraka road section, the paving of the Carolina-Joden Savanne road section, and the paving of the roads leading to Colakreek and Baboenho. China Dalian International Economic & Technical Cooperation Group Co., Ltd. was the contractor responsible for implementation of this project. On April 21, 2008, a groundbreaking ceremony was held. Paving of the Afobakka road commenced on August 1, 2008 and concluded on November 23, 2009. Paving of the Berg en Dal-Atjoni road commenced in late 2009. The project was originally slated for completion in 2011. It is unknown if or when the project was completed. The 500 km Dalian III Road Rehabilitation Project became a source of controversy when it was revealed that China Dalian International Economic & Technical Cooperation Group Co., Ltd. wanted to import 450 Chinese laborers and mine laterite instead of using Surinamese producers. Further controversy arose when the renovation of the road running south from Paramaribo to Afobaka turned out to be narrower than expected and covered with the lower-quality laterite mined by China Dalian International Economic & Technical Cooperation Group Co., Ltd. itself. The are also some indications that the China Eximbank loans issued for the 500 km Dalian III Road Rehabilitation Project may have underperformed vis-a-vis lender expectations. The Government of Suriname defaulted on its sovereign debt obligations three times during the COVID-19 pandemic. In December 2021, the International Monetary Fund (IMF) announced that ‘Suriname owes arrears to China and India, which have provided assurances, although less specific than those provided by the Paris Club creditors, that they intend to work with Suriname towards a debt restructuring that will restore sustainability. China has consented to [IMF] financing notwithstanding these arrears. [...] An update will be circulated to the [IMF] Executive Board not later than one week prior to the scheduled Board consideration. On the basis of the Surinamese authorities’ commitment noted above, staff expect that debt to China and India will be treated on comparable terms with other bilateral creditors. The arrears constitute a form of financing contribution to the program. China and India have acknowledged that Suriname will continue to run arrears on their official debt until a debt treatment can be agreed.’ The IMF also disclosed in December 2021 that ‘[t]he stock of external arrears is estimated to be at 11 percent of GDP by end-2021, including arrears of USD 61 million to China.’ Then, in May 2023, the IMF announced the ‘[a]n agreement was reached with Paris Club (PC) creditors for a two-step debt treatment in June 2022, and bilateral agreements with most of the PC creditors have been completed. An agreement-in-principle with bondholders was reached on May 4, 2023. The authorities are actively negotiating in good faith with China and India on a debt restructuring agreement.’