Narrative
Full Description
Project narrative
In January 2016, the Government of Zambia and the Industrial and Commercial Bank of China (ICBC) signed a $274,612,768.07 loan agreement for the 2350-Unit Police and Security Force Housing Project. The proceeds of the loan were to be used by the borrower to finance 85% of the cost of a $323,073,844.79, three-year commercial (EPC) contract between the Government of Zambia's Ministry of Home Affairs and AVIC International, which was signed in December 2014. The Government of Zambia was responsible for directly financing the remainder (15%) of the project cost. As of July 2022, the ICBC loan had achieved a 97.9% disbursement rate ($268,959,363.78 out of $274,612,768.07). The purpose of the project was to construct 2,350 housing units for members of Zambia's Ministry of Home Affairs: Zambia Police Service, Zambia Correctional Services, the Immigration Department, and the Drug Enforcement Commission. These housing units included 997 low-cost units, 1,238 medium-cost units, and 115 high-cost units. AVIC International and China 15th Metallurgical Construction Group Co. Ltd. were the contractors responsible for project implementation. The project was implemented in two phases. Phase 1 was made up of four sites: Chelston in Lusaka (48 houses); Silverest in Lusaka, Chongwe area (41 houses); Kawama in Kitwe (24 houses); and Mukobeko in Kabwe (42 houses). Phase 1 officially launched on October 27, 2015, but Phase 1 construction did not begin until July 7, 2017. Phase 2 construction activities ended on June 20, 2020. On July 29, 2022, the Ministry of Finance & National Planning (MOFNP) of Zambia announced that it was seeking lender approval to formally cancel the ICBC loan’s undisbursed balance ($5,653,404.29); however, it also noted that it had not yet secured formal lender approval for this action. This announcement came approximately 21 months after the Government of Zambia defaulted on its repayment obligations to Eurobond holders and approximately 6 weeks after China, France, and 14 other countries formed a creditor committee to discuss the Zambian authorities’ request for a debt treatment under ‘the Common Framework for Debt Treatment beyond the DSSI’ endorsed by the G20 and the Paris Club.
Staff comments
1. This project is also known as the Police and Security Housing Project and the Security Wing Project. The Chinese project title is 赞比亚保障房项目 or 赞比亚干警住宅项目 or 中航国际内政部保障房 or 赞比亚内政部预制保障房项目. 2. In the database of Chinese loan commitments that it released in July 2020, SAIS-CARI identifies this loan as a $275 million syndicated loan supported by ICBC, China CITIC Bank, and Bank of Jiangsu. 3. According to the World Bank's Debtor Reporting System (DRS), the weighted average grace period of all ‘private’ sector lending from all Chinese creditors to government and government-guaranteed borrowing institutions in Zambia was 3.7841 years in 2016. AidData estimates the grace period of the ICBC loan that supported the 2350-Unit Police and Security Force Housing Project by using this figure. See https://www.dropbox.com/scl/fi/iymnqwd205mvs5h8crtv8/DRS-May-2024-Extraction-Private-Chinese-Loan-Commitments-to-Zambia.xlsx?rlkey=bi71wlqbrbnfienx75a7bq1g2&dl=0 4. According to the World Bank's Debtor Reporting System (DRS), the weighted average maturity of all ‘private’ sector lending from all Chinese creditors to government and government-guaranteed borrowing institutions in Zambia was 16.2602 years in 2016. AidData estimates the maturity of the ICBC loan that supported the 2350-Unit Police and Security Force Housing Project by using this figure. See hxttps://www.dropbox.com/scl/fi/iymnqwd205mvs5h8crtv8/DRS-May-2024-Extraction-Private-Chinese-Loan-Commitments-to-Zambia.xlsx?rlkey=bi71wlqbrbnfienx75a7bq1g2&dl=0 5. According to the World Bank's Debtor Reporting System (DRS), the weighted average interest rate of all ‘private’ sector lending from all Chinese creditors to government and government-guaranteed borrowing institutions in Zambia was 4.2599% in 2016. AidData estimates the interest rate of the ICBC loan that supported the 2350-Unit Police and Security Force Housing Project by using this figure. See https://www.dropbox.com/scl/fi/iymnqwd205mvs5h8crtv8/DRS-May-2024-Extraction-Private-Chinese-Loan-Commitments-to-Zambia.xlsx?rlkey=bi71wlqbrbnfienx75a7bq1g2&dl=0 6.In July 2022, Zambia announced that it is cancelling certain projects in their entirety or cancelling undisbursed portions of certain Chinese loans unilaterally. 11 China Exim bank projects are cancelled, 3 ICBC projects are cancelled, 1 Jiangxi Bank project is cancelled. While it is unclear if the creditors agreed to this action, there is some evidence that shows the cancellation had ocurred. This issue warrants more investigation. The announcement can be accessed at https://www.dropbox.com/scl/fi/bxixfu3t97x14epaqayjv/MEASURES-TAKEN-REGARDING-SOME-LOAN-FINANCED-PROJECTS.pdf?rlkey=azvseog366a7ntoo93fjiatrj&e=3&dl=0