Project ID: 40491

China Eximbank provides $399.9 million preferential buyer’s credit for Kazarman-Jalal Abad Section and Balykchy-Aral Section of Alternative North-South Road Project (Linked to Project ID #46350 and #53585)

Commitment amount

$ 451202258.7233585

Adjusted commitment amount

$ 451202258.72

Constant 2021 USD

Summary

Funding agency [Type]

Export-Import Bank of China (China Eximbank) [State-owned Policy Bank]

Recipient

Kyrgyzstan

Sector

Transport and storage (Code: 210)

Flow type

Loan

Level of public liability

Central government debt

Financial distress

Yes

Infrastructure

Yes

Category

Intent

Mixed (The next section lists the possible statuses.)

Commercial

Development

Representational

Mixed

Financial Flow Classification

OOF-like (The next section lists the possible statuses.)

Official Development Assistance

Other Official Flows

Vague (Official Finance)

Flows categorized based on OECD-DAC guidelines

Project lifecycle

Status

Completion (The next section lists the possible statuses.)

Pledge

Commitment

Implementation

Completion

Suspended

Cancelled

Milestones

Commitment

2013-09-11

Actual start

2014-05-02

Planned complete

2018-12-01

Actual complete

2021-11-10

NOTE: Red circles denote delays between planned and actual dates

Geography

Description

On September 11, 2013, China Eximbank and the Government of the Kyrgyz Republic's Ministry of Finance signed a $399,989,041 preferential buyer credit (PBC) loan agreement [CHINA EXIMBANK PBC No (2013) 37 TOTAL No (281)] for the construction of the Kazarman-Jalal Abad Section (km291-km433) and Balykchy-Aral Section (km183+500-195+486) of the Alternative North-South Road Project. This project is also known as Phase 1 of the Alternative North-South Road Project (or “Строительство альтернативной автомобильной дороги Север-Юг, фаза 1”). The loan carried the following borrowing terms: a 20 year maturity, an 11 year grace period, a 2% interest rate, a 0% default (penalty) interest rate, a 0.18% management fee, and a 0.25% commitment fee. The proceeds from the loan were used to support a July 8, 2013 commercial contract worth $399,989,041 between the Ministry of Transport and Communications of the Kyrgyz Republic and China Road and Bridge Corporation (CRBC). According to the Government of the Kyrgyz Republic’s Aid Management Platform (AMP), the first loan disbursement (of $99,997,300) took place on December 31, 2014. The same source notes that the loan’s overall disbursement rate, as of 2014, was 25% ($99,997,300 out of $399,989,041). According to internal data that the Kyrgyz Ministry of Finance shared with AidData in July 2022, this loan achieved a disbursement rate of 75% ($299,991,780.75 of $399,989,041) as of December 31, 2021 and its amount outstanding was $303,058,363.40 as of December 31, 2021. The purpose of the project was to construct the Kazarman-Jalal Abad (km291-km433) section and Balykchy-Aral (km183+500-km195+486) section of the Alternative North-South Road. More specifically, it supported the construction of two road segments: one that runs from Kazarman village to Jalal Abad town (km291-km433) and another than runs from Balykchy (Kyzyl-Zhyldyz) village to Aral village (km183+500-195+486). The ultimate aim of this international North-South transport corridor is to reduce trade costs and connect Russia, Central Asia, Iran, and India. CRBC was the contractor responsible for project implementation. Construction began on May 2, 2014. The project was originally scheduled for completion in December 2018. However, as of December 2020, it had still only achieved a 70% completion rate. The project was ultimately completed on November 10, 2021. It passed China Eximbank's final inspection in November 2022. The are some indications that the preferential buyer's credit for the Kazarman-Jalal Abad Section and Balykchy-Aral Section of Alternative North-South Road Project financially underperformed vis-a-vis the original expectations of the lender. On or around July 1, 2021, China Eximbank and the Government of the Kyrgyz Republic signed a debt suspension agreement [No. DSSI2021PHASE2-029]. Under the terms of the agreement (captured via Project ID#96102), the lender agreed to suspend principal and interest payments due between July 1, 2021 and December 31, 2021 under the preferential buyer's credit agreement for the Kazarman-Jalal Abad Section and Balykchy-Aral Section of Alternative North-South Road Project. The Alternative North-South Road Project has also been plagued by controversy and corruption allegations. According to a 2018 investigation, former Minister of Transport and Communications Kalykbek Sultanov and the Minister of Transport and Communications at the time (Zhamshitbek Kalilov) may have colluded with the contractor responsible for project implementation (CRBC) to embezzle funds that were allocated for the Alternative North-South Road by China Eximbank. The investigation found the project input costs were inflated by several orders of magnitude — from paying $1.1 per kilogram of cement (while the cost on the local market was $0.07) to paying $2,000 a month to provide office space to an engineer on the construction site.

Additional details

1. The Alternative North-South Road Project (Russian: строительства альтернативной дороги Север—Юг; Chinese: “北-南公路”) is being implemented in three parts and financed with 3 different China Eximbank loans: Phase 1 of the project [Kazarman-Jalal Abad Section (km291-km433) and Balykchy-Aral Section (km183+500-195+486)] is being financed with a $399,989,041 PBC from China Eximbank (Project ID# 40491). Phase 2 of the project [the Aral-Kazarman Section (195 km-291 km)] is being financed with a RMB 697,562,608.76 government concessional loan (GCL) from China Eximbank (Project ID#46350) and a 185,254,119 PBC from China Eximbank (Project ID#53585). Phase 3 of the project [the Balykchy-Kyzyl-Zhyldyz Section (0-183km) was funded by the Asian Development Bank. 2. The project identification number in the Government of the Kyrgyz Republic’s Aid Management Platform (AMP) is 8718835226. 3. The China Eximbank (PBC) loan agreement can be accessed in its entirety via https://www.documentcloud.org/documents/20488735-kgz_2013_431. 4. The July 2021 debt suspension agreement [No. DSSI2021PHASE2-028] can be accessed in its entirety via https://www.dropbox.com/s/huwa695j3w9hwig/DSSI%20Agreement%20for%20Kyrgyz%20Republic.pdf?dl=0. 5. A detailed loan repayment reschedule (that the Kyrgyz Ministry of Finance shared with AidData in July 2022) can be accessed via https://www.dropbox.com/s/xg0cmomv0qk7cbj/Repayments.xlsx?dl=0. The schedule reflects actual repayments through December 31, 2021 and planned/scheduled repayments after December 31, 2021. Note also that (a) China Eximbank granted the Government of Kyrgyz Republic a a deferral of payments for the period from August 2021 to December 2021, and (b) the deferred principal and interest amounts are included in the main body of the debt and the repayment amounts of the deferrals (with additional accrued interest for granting a deferment) are already included in the repayment schedule. 6. The Chinese project title is 第二条北南公路项目 or 吉尔吉斯斯坦南北第二条公路建设项目 or 南北路二期项目.

Number of official sources

27

Number of total sources

50

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Details

Cofinanced

No

Direct receiving agencies [Type]

Ministry of Finance of the Kyrgyz Republic [Government Agency]

Implementing agencies [Type]

China Road & Bridge Corporation (CRBC) [State-owned Company]

Loan Details

Maturity

20 years

Interest rate

2.0%

Grace period

11 years

Grant element (OECD Grant-Equiv)

56.394%

Bilateral loan

Export buyer's credit

Investment project loan

Preferential Buyer's Credit