Narrative
Full Description
Project narrative
On November 18, 2009, China Eximbank and the Government of Angola entered into a $6 billion Master Loan Facility Agreement (MLFA), which was amended and reissued on June 8, 2011. All borrowings under the MLFA, which is an oil prepayment facility, carried the following estimated borrowing terms: a 3.6708% interest rate, a 17.5 year maturity, and a 2.5 year grace period. Sonangol provided a source of collateral under the MLFA, and repayments were made with the proceeds of oil sales from Sonangol to UNIPEC (China international United Petroleum & Chemicals Co. Ltd, Sinopec group), which were deposited in an Angolan Ministry of Finance (MINFIN) account at China Eximbank. The amount available under the MLFA was a function of the number of barrels of oil per day sold by Sonangol to Chinese importers designated by China Eximbank. The amount available under the MLFA increased from a minimum of $3.0 billion to a maximum of $6.0 billion, with increments of $1.0 billion, depending on the number of barrels per day sold by Sonangol to China Eximbank's designated importers. The MLFA was a framework agreement under which the Government of Angola and China Eximbank could conclude individual loan agreements (ILAs) for the purpose of financing up to 90% of the contract price owing to certain contractors in respect of certain contracts. $1.2 billion had been disbursed through the MLFA as of June 30, 2015 and $1.605 billion had been disbursed through the MLFA as of December 31, 2017 (as captured via Record ID#66690). The (principal) amount outstanding under the MLFA was $1.19 billion as of December 31, 2021. There are some indications that the Government of Angola's borrowings under the November 18, 2009 MLFA have financially underperformed vis-a-vis the original expectations of the lender. As a result of the Government of Angola’s decision to avail itself of the G20's Debt Service Sustainability Initiative (DSSI), the MLFA and ILAs entered into by China Eximbank and the Government of Angola (described above) were under DSSI treatment and payments due by the Government of Angola under these finance agreements were suspended from May 1, 2020 until December 31, 2021.
Staff comments
1. AidData relies on the maturity, grace period, and interest rate that are recorded in the World Bank's Debt Reporting System (a 3.6708% interest rate, a 17.5 year maturity, and a 2.5 year grace period). See https://www.dropbox.com/s/ab8qt4n6jijcbhd/IDS_Average%20interest%20on%20new%20external%20debt%20commitments.xlsx?dl=0 and https://www.dropbox.com/s/949n5rctiue6d7c/IDS_Average_grace_period_and_maturity_on_new_external_debt_commitments.xlsx?dl=0 and https://www.dropbox.com/s/2sw4f7gluxa52fk/DRS%20Official%20Commitments%20from%20China%20Through%202021.xlsx?dl=0 and https://www.dropbox.com/s/0vpohwt96l40o19/World%20Bank%20DRS%20Extract%20Sep%202021%20--%20Chinese%20Loan%20Commitments%20from%202013%20to%202019.xlsx?dl=0 2. In July 2020, AidData asked Dr. Lucy Corkin, a leading expert on Chinese lending to Angola, whether the second, third, and fourth master loan facility agreements (MLFAs) that the Angolan Government signed with China Eximbank in 2007 and 2009 were structured as a buyer’s credit loans like the first MLFA that the Angolan Government signed with China Eximbank in 2004. Dr. Corkin noted that the second, third and fourth MLFAs were treated more like ceiling increases to the initial facility. Therefore, for the time being, AidData categorizes the second, third, and fourth MLFAs as buyer's credit loans. 3. Sinosure is assumed to be involved in this loan facility as the 2003 framework agreement (中华人民共和国商务部与安哥拉共和国财政部关于两国经贸合作特殊安排的框架协议) specified that Sinosure would be signing relevant agreements with the Government of Angola. 4. AidData considers this loan to be collateralized in a de facto sense. The cash desposited by the Angolan Ministry of Finance into a bank account controlled by China Eximbank is, for all intents and purposes, a source of collateral. This is true even if the lender does not have a formal security interest in the account. 5. On June 9, 2015, the Government Angola and China Eximbank entered into amendments of this MLFA and others in order to realign payments of drawn amounts under certain ILAs with the revised schedules of progress and/or completion of certain specified public investment projects, the timing and/or scale of which was altered when the revised 2015 national budget was adopted in March 2015.