China Eximbank provides RMB 594 million government concessional loan for Phase 2 of the 9 Cities Water Supply Project (Linked to Record ID#30903)

Project narrative

On March 22, 2018, China Eximbank signed an RMB 594 million (CFA 48.8 billion) government concessional loan (GCL) agreement with Cameroon's Ministry of Economy, Planning and Regional Development for Phase 2 of the 9 Cities Water Supply Project. The GCL carries the following borrowing terms: a 2% interest rate, a 20 year maturity, and a 5 year grace period. As of December 31, 2020, the loan (GCL) had achieved a 0% disbursement rate (with an undisbursed balance of CFA 48.8 billion). The purpose of the second phase of the project is to extend and upgrade drinking water production plants in 9 cities of Sangmélima, Yabassi, Maroua, Garoua, Garoua-Boulai, Bafoussam, Dschang, Bamenda, and Kribi. Phase 2 is itself scheduled to be undertaken in two parts or phases, the first of which will focus on the cities of Bafoussam, Bamenda, Kribi and Sangmélima (with a goal of providing additional daily water production of 10,000 m3 per city in Bafoussam and Bamenda, and 7,000 m3 per city in Kribi and Sangmélima, for a total of 34,000 m3). CGCOC Group Co., Ltd is the contractor responsible for Phase 2 implementation. As of late 2021, all project activities in the cities of Bafoussam, Kribi and Sangmélima were completed and provisionally accepted; however, project activities in Bamenda were on ‘standby’ due to the security situation. Phase 2 of the 9 Cities Water Supply Project was launched on on August 28, 2023, in Garoua-Boulaï, Lom-et-Djérem department, East Region. There are some indications that the China Eximbank loan for Phase 2 of the 9 Cities Water Supply Project may have financially underperformed vis-a-vis the original expectations of the lender. In January 2019, Cameroon unilaterally withheld debt service payments to China Eximbank. The lender responded by withholding new loan disbursements. Then, in July 2019, China Eximbank and the Government of Cameroon signed a debt rescheduling agreement (as captured via Record ID#88213). Under the terms of the agreement, China Eximbank agreed to reschedule 18 loans previously contracted by the Government of Cameroon — with scheduled principal repayments between July 2019 and March 2022 — by allowing the borrower to defer scheduled principal repayments between July 2019 and March 2022 to later dates but without any maturity extensions. The total amount of restructured debt was equivalent CFA 148 billion ($253 million) — or 70% of the loan principal that was scheduled for repayment between July 2019 and March 2022. Under the terms of the agreement, the Government of Cameroon agreed to repay 30% of the loan principal according to the original July 2019-March 2022 schedule (i.e. without any payment deferrals). The lender and the borrower also agreed to cancel the committed but undisbursed loan balances worth approximately CFA 10 billion (for certain loans with disbursement deadlines that had already passed). Then, in January 2020, the International Monetary Fund (IMF) classified the Government Cameroon as facing a high risk of debt distress. Eighteen months later, during an address before Cameroon’s National Assembly on June 28, 2021, the Minister of Water and Energy (MINEE) Gaston Eloundou Esommba provided an update on the ICBC-financed Bini à Warak Hydroelectric Power Plant Project. He noted that the project had been 'on hold' since November 2019 because ICBC suspended the loan agreement, even though the Government of Cameroon had already mobilized XAF 22 billion of counterpart funding. He also explained that 'the reason for this suspension is that Cameroon did not settle some of its debts towards China on time, so, it is in a cross-default situation.’