China Eximbank provides $102.8 million buyer’s credit loan for 22 km Farasol Mbéga-Port-Gentil Road Project (Linked to Record ID#60747 and #73174)

Project narrative

On December 3, 2015, during the state visit of Gabonese President Ali Bongo Ondimba to China, the Government of Gabon and China Eximbank signed a buyer’s credit loan (BCL) agreement worth $102,849,176.27 for the 22 km Farasol Mbéga-Port-Gentil Road Project. The BCL carries the following terms: a 15 year maturity, a 3 year grace period, an interest rate of 6-month LIBOR plus a 3.2% margin, a 1% default (penalty) interest rate, a 0.5% ($514,245.88) management fee, and a 0.5% commitment fee. The proceeds from the BCL will be used to finance 95% of the cost of a commercial contract with China Road and Bridge Corporation (CRBC). The Government of Gabon was expected to cover the remaining 5% of the cost of the commercial contract. The project involved the construction of a 22km road segment from Farasol-Mbéga to Port-Gentil. This road segment connects to the starting point of the China Eximbank-financed Port Gentil-Omboué (PO) Road (captured via Record ID#60747 and Record ID#73174). CRBC was the contractor responsible for implementation. A groundbreaking ceremony took place on February 28, 2016. The project was reportedly completed; however, its precise completion date is unknown. There are some indications that the China Eximbank loan for the 22 km Farasol Mbéga-Port-Gentil Road Project may have financially underperformed vis-a-vis the original expectations of the lender. In mid-2014, a decline in international oil prices generated sharp reductions in Gabon’s oil exports and fiscal revenues. The country’s rising fiscal deficit led to the accumulation of arrears to external creditors. By 2017, the stock of the Government of Gabon’s external arrears stood at $115 million, including arrears to China, Canada, Germany, Spain, France, Israel, and South Korea. All of these arrears were successfully cleared by 2020. However, the Government of Gabon accumulated $3 million of additional arrears to Chinese creditors in 2020. By the end of May 2021, ‘the stock of [the Government of] Gabon’s external arrears stood at CFAF 98.03 billion (US$182.1 million), including CFAF 23.8 billion (US$44.2 million) vis-à-vis multilaterals and CFAF 21.05 billion (US$39.1 million) vis-à-vis government agencies and private creditors insured with companies from Paris Club member countries and from China [ICBC and China Construction Bank] CFAF 1.3 billion (US$2.42 million). The Government's strategy for the clearance of existing external arrears consists of focusing primarily on multilateral debt, bilateral debt, insured commercial commitments and seeking agreements with other creditors prior to the IMF Board meeting. Accordingly, we will clear the arrears vis-à-vis the multilaterals. We will also clear bilateral and commercial-insured arrears as follows: (i) Austria CFAF 6.83 billion (US$12.69 million); (ii) France CFAF 11.9 billion (US$22.11 million); (iii) Israel CFAF 2.23 billion (US$4.13 million); and Spain CFAF 0.09 billion (US$0.17 million). Regarding the other commercial arrears vis-à-cis AFREXIMBANK (CFAF 7.52 billion or US$13.97 million, and commercial non-insured vis-à-vis France CFAF 0.7 billion (US$1.24 million), Austria CFAF 8.71 billion (US$16.18 million), and Morocco CFAF 1.01 billion (US$1.87 million), we contacted these creditors individually to obtain from them the non-objection agreement. The same communication was made with China to which our bilateral payment arrears are about CFAF 34.01 billion (US$63.17 million).’ Then, on April 3, 2024, Gabon’s Ambassador to China transmitted a letter (reference number: 000115/AMBAGAB-RPC/24) to the transitional authorities in Gabon, urging them to consider a debt settlement mechanism whereby the Government of Gabon would repay its outstanding debts to China Eximbank by depositing the cash proceeds from the sale of 1 or 2 oil cargoes (worth $150 million per cargo) each year to UNIPEC in a China Eximbank-controlled escrow account.