China Eximbank provides RMB 200 million government concessional loan for Phase 2 of National Telecom Network Project (Linked to Project ID#752)

On August 10, 2011, the Chinese Government and the Government of Lesotho signed a concessional loan framework agreement for Phase 2 of the National Telecom Network Project. Then, on December 12, 2011, China Eximbank and the Government of Lesotho signed a government concessional loan (GCL) agreement worth RMB 200 million to support Phase 2 of the National Telecom Network Project. The borrowing terms of the GCL are unknown. The Government of Lesotho used the proceeds of the loan to on-lend to Econet Telecom Lesotho, a state-owned telecommunications operator in Lesotho. Econet Telecom Lesotho (ETL), in turn, used the loan proceeds to expand, upgrade and modernize Lesotho’s telecommunications infrastructure. Anhui Telecom Engineering Co. was the contractor responsible for Phase 2. Work appears to have began shortly after Anhui Telecom Engineering Co. signed an implementation agreement on April 24, 2012. The project was officially handed over to the Government of Lesotho on May 31, 2013. ETL did not honor its repayment obligations to the Government of Lesotho under the terms of its on-lending agreement. According to a Report on the Consolidated Financial Statements of the Government of Lesotho for the Three Years 2013/14, 2014/15, and 2015/16 And Other Incidental Findings published by the Public Accounts Committee of the Parliament of Lesotho, '[Econet Telecom Lesotho] claims that it is not making profits but this is hard to believe as the Committee suspects transfer pricing practices. Again, the services have not improved as expected when the loan was secured for Econet. The Committee [is] concerned the Government of Lesotho is shouldering the burden of paying the loans on behalf of Econet while Econet is not remitting anything to the Government [of Lesotho].'

Additional details

1. This project is also known as the Econet Telecom Lesotho (ETL) National Network Phase II Project. The Chinese project title is 莱索托全国通讯网络二期项目 or 莱索托国家电信网络项目二期. 2. Government concessional loans from China Eximbank are denominated in RMB, so AidData relies on the face value of the loan (RMB 200 million) reported by the IMF. In the the database of Chinese loan commitments that it released in July 2020, SAIS-CARI refers to the face value of the loan as $9 million, which is substantially lower than the values reported by the IMF (RMB 200 million), the World Bank ($36 million), the Government of Lesotho ($20 million), and the Public Accounts Committee (M245,297,692.05). 3. SAIS-CARI also identifies this project as reaching the loan signature (i.e. official commitment) stage but not the implementation stage or completion stage. However, AidData records this project as completed based on the May 31, 2013 handover date reported by the Chinese Government. 4. According to the World Bank's Debtor Reporting System (DRS), the weighted average maturity of all official sector lending from Chinese creditors to government and government-guaranteed borrowing institutions in Lesotho was 19.7499 years in 2011. AidData estimates the maturity of the China Eximbank loan that supported Phase 2 of the National Telecom Network Project by using this figure. See https://www.dropbox.com/s/949n5rctiue6d7c/IDS_Average_grace_period_and_maturity_on_new_external_debt_commitments.xlsx?dl=0 5. According to the World Bank's Debtor Reporting System (DRS), the weighted average grace period of all official sector lending from Chinese creditors to government and government-guaranteed borrowing institutions in Lesotho was 5.2499 years in 2011. AidData estimates the grace period of the China Eximbank loan that supported Phase 2 of the National Telecom Network Project by using this figure. See https://www.dropbox.com/s/949n5rctiue6d7c/IDS_Average_grace_period_and_maturity_on_new_external_debt_commitments.xlsx?dl=0 6. According to the World Bank's Debtor Reporting System (DRS), the weighted average interest rate of all official sector lending from Chinese creditors to government and government-guaranteed borrowing institutions in Lesotho was 2% in 2011. AidData estimates the interest rate of the China Eximbank loan that supported Phase 2 of the National Telecom Network Project by using this figure. See https://www.dropbox.com/s/ab8qt4n6jijcbhd/IDS_Average%20interest%20on%20new%20external%20debt%20commitments.xlsx?dl=0 7. China Eximbank also provided a loan for Phase 1 of the National Telecom Network Project (captured via Project ID#752).

Number of official sources

13

Number of total sources

14