China Eximbank provided Mozambique $72.5 million buyer's credit loan for Maputo-Katembe Bridge Construction Project (Linked to Record ID#1240)

Project narrative

On July 18, 2012, the Government of Mozambique ratified a $681,590,562.91 buyer’s credit loan (BCL) agreement with China Eximbank for the Maputo-Katembe Bridge Construction Project. (as captured via Record ID#1240). The BCL, which was finalized after the Government of Portugal failed to fulfill its 2010 commitment to finance the bridge, carried the following borrowing terms: a maturity of 20 years, a grace period of 5 years, and an interest rate of 4%. Its first scheduled principal payment date is January 21, 2017 and its last scheduled principal payment (maturity) date was July 21, 2028. The loan's (principal) amount outstanding was $375,067,148 as of December 31, 2022. The Government of Mozambique agreed to collect toll revenue to repay the loan. Then, on May 30, 2012, the Government of Mozambique signed another buyer’s credit loan (BCL) agreement with China Eximbank worth $72,580,000 to provide supplemental funding for the Maputo-Katembe Bridge Construction Project (captured via Record ID#57131). The loan carried a 20 year maturity period, a 5 year grace period, and an unknown interest rate. The borrower purchased buyer’s credit insurance from Sinosure in support of the loan. Its first scheduled principal payment date is July 21, 2018 and its last scheduled principal payment (maturity) date was January 21, 2033. The loan's (principal) amount outstanding was $50,806,000 as of December 31, 2022. The Maputo-Katembe Bridge Construction Project involved the construction of a 3 kilometer long and 48 meter high suspension bridge that connects the cities of Maputo and Katembe. It also involved the extension of 129 kilometer road from Katembe to the border town of Ponta do Ouro, and the upgrading of ta 63 kilometer road between Boane and Bela Vista (including bridges over the Maputo, Futi and Umbelúzi rivers). China Road and Bridge Corporation (CRBC) and the Maputo Development Corporation (Maputo-Sul) were the entities responsible for implementation. An official groundbreaking ceremony took place on September 20, 2012. However, construction did not begin in earnest until June 6, 2014 and the project encountered several major problems and delays. Maputo-Sul and CRBC employed more than 3,800 local workers and 500 Chinese workers. However, local workers organized protests in 2014 due to poor working conditions and late payments of salaries. The construction of the bridge also required the resettlement of 900 families and stallholders from the Nwankakakana market. Initially, insufficient compensation was offered to the concerned parties; however, extra funds were eventually allocated for building houses for the families and remunerating stallholders. The project was originally scheduled for completion on June 25, 2018 but it was ultimately completed on November 10, 2018. There are some indications that the China Eximbank loan for the Maputo-Katembe Bridge Construction Project may have financially underperformed vis-a-vis the original expectations of the lender. In 2016, several credit rating agencies downgraded the Government of Mozambique to 'selective default' or 'restricted default' status, and the World Bank and the IMF re-classified Mozambique's external debt as 'in distress.' In January 2017, the Government of Mozambique defaulted on a coupon payment for its dollar-denominated Eurobond. Then, in February 2018, the International Monetary Fund (IMF) announced that the Government of Mozambique had accumulated $710 million in arrears to external creditors and had agreed to reschedule some bilateral debt service payments with the Chinese Government. Two months later, in April 2018, Stelia Neta, a National Director at the Ministry of Finance of Mozambique revealed that the Government of Mozambique’s outstanding debt obligations to the Chinese Government amounted to $2.02 billion and the Chinese Government had agreed to extend the grace periods (and first principal repayments) on these outstanding debt obligations without changing their final maturity dates or interest rates (as captured via Record ID#66283).