Narrative
Full Description
Project narrative
On June 15, 2015, China Eximbank and the Government of the Kyrgyz Republic's Ministry of Finance signed a RMB 697,562,608.76 ($112,640,000) government concessional loan (GCL) agreement [CHINA EXIMBANK GCL NO. (2015) 9 TOTAL NO. 548] for the Aral-Kazarman Section (195 km-291 km) of the Alternative North-South Road Project. The GCL (loan) carried the following borrowing terms: a 25 year maturity, an 11 year grace period, a 1.5% interest rate, a 0% default (penalty) interest rate, a 0.18% management fee, and a 0.18% commitment fee. The proceeds of the loan were to be used by the borrower to partially finance a May 4, 2014 commercial contract [EXMB/KG/NS-05] worth $298,796,966.13 between the Ministry of Transport and Communications of the Kyrgyz Republic and China Road and Bridge Corporation (CRBC). According to internal data that the Kyrgyz Ministry of Finance shared with AidData in July 2022, this loan achieved a disbursement rate of 100% as of December 31, 2021 and its amount outstanding was $702,910,588.76 as of December 31, 2021. The purpose of the project was to construct a section of the Alternative North-South Road that runs from Aral to Kazarman (195 km to 291 km). 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 EPC contractor responsible for project implementation. Construction began on August 10, 2015 and 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. There are some indications that the government concessional loan for the Aral-Kazarman Section (195 km-291 km) of the 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 Record ID#96102), the lender agreed to suspend principal and interest payments due between July 1, 2021 and December 31, 2021 under the government concessional loan for the Aral-Kazarman Section (195 km-291 km) of the 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.
Staff comments
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 (Record 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 (Record ID#46350) and a 185,254,119 PBC from China Eximbank (Record 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 87188512761. 3. The China Eximbank (PBC) loan agreement can be accessed in its entirety via https://www.documentcloud.org/documents/20488738-kgz_2015_427. 4. This project is also known as Phase 2 of the Alternative North-South Road Project (or “Строительство альтернативной автомобильной дороги Север-Юг, фаза 2”). 5. 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. 6. 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 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.