China Eximbank provides RMB 693 million government concessional loan for Phase II of the National Fibre Backbone Project (Linked to Project ID#52386)

In 2018, the Parliament of Malawi passed a Loan Authorization Act allowing the Government of Malawi to borrow $99 million from the China Eximbank loan for Phase II of the National Fibre Backbone Project. In February 2019, Malawi's ICT Minister Henry Mussa held a meeting with China Eximbank officials to reaffirm Malawi's need for more widespread internet connectivity to rural areas. China Eximbank official Zeng Ming promised the project was in the final procedural stages before funding could be released. Then, on August 18, 2020, the Government of Malawi and China Eximbank signed an RMB 693 million governmental concessional loan (GCL) agreement for Phase II of the National Fibre Backbone Project. The GCL carries the following borrowing terms: a 20 year maturity (final maturity date: March 21, 2040), a 6.5 year grace period (first repayment date: March 21, 2027), a 1% interest rate, a 0.25% commitment fee, and a 0.25% management fee. The proceeds of the loan were on-lent to the Electricity Supply Commission of Malawi. In a Mid Year Public Debt Report for 2020/2021 Financial Year, Malawi’s Ministry of Finance noted that the loan had ‘registered significant disbursements’. By June 2023, the loan had disbursed RMB 299,286,770.33. The loan's principal amount outstanding was RMB 299,286,770.33 as of June 2023. As of 2022, the borrower expected to make principal repayments each year worth RMB 22,169,390.39 between 2028 and 2040. The purpose of Phase II is to construct a national data recovery center, lay nearly 3,000 kilometers of fiber optic cables, and install a video-conferencing system in government offices. Huawei Technologies Co., Ltd. is the contractor responsible for project implementation. Phase II was officially launched by Malawi’s President Lazarus Chakwera on June 29, 2021. Huawei Technologies Co., Ltd. commissioned Malawi's first-ever National Data Cente on July 21, 2022 in the country's second-largest city of Blantyre. Malawian President Lazarus Chakwera said the data center would give Malawi a stake in the 4th Industrial Revolution of big data, artificial intelligence, digital financial services and the internet of things (IoT), among others. There are some indications that the China Eximbank loan for Phase II of the National Fibre Backbone Project has financially underperformed vis-a-vis the original expectations of the lender. In 2021, Malawi's Minister of Finance announced that ‘in 2020/21 FY, Government [of Malawi] requested temporary debt service suspension from bilateral creditors. This is in line with the Extended Debt Service Suspension Initiative (DSSI). The key feature of the Extended DSSI is that the repayment period of the principal and interest payments falling due between 1st January 2021 to 30th June 2021 will be made in five years with one-year grace period. This entails that in 2021/22 FY, the suspended debt service will be within the grace period.’ Then, in November 2022, the World Bank and the IMF judged the Government of Malawi’s external debt and overall public debt to be ‘in distress’—a downgrade from the previous World Bank-IMF Debt Sustainability Analysis (DSA). In July 2023 correspondence with AidData’s Executive Director, the Government of Malawi revealed that it was in negotiations with China Eximbank about rescheduling all of their loans with amounts outstanding. The Government of Malawi proposed principal payments worth RMB 61 million and interest payments worth RMB 26 million in 2023, interest payments worth RMB 26 million and principal payment deferrals in 2024 and 2025, RMB 50 million in principal and interest payments in 2026, RMB 90 million in principal and interest payments in 2027, RMB 89 million in principal and interest payments in 2028, RMB 88 million in principal and interest payments in 2029, RMB 87 million in principal and interest payments in 2030, RMB 86 million in principal and interest payments in 2031, and RMB 85 million in principal and interest payments in 2032. China Eximbank proposed principal payments worth RMB 61 million and interest payments worth RMB 26 million in 2023, interest payments worth RMB 26 million and principal payment deferrals in 2024 and 2025, RMB 148 million in principal and interest payments in 2026, RMB 299 million in principal and interest payments in 2027, RMB 294 million in principal and interest payments in 2028, RMB 228 million in principal and interest payments in 2029, RMB 121 million in principal and interest payments in 2030, RMB 101 million in principal and interest payments in 2031, and RMB 82 million in principal and interest payments in 2032. As of July 2023, a debt rescheduling deal had not yet been reached by the parties.

Additional details

1. The World Bank's Debtor Reporting System identifies the face value of the loan as $100,489,208.20 (see https://www.dropbox.com/s/kwxk7hpv0dyicpi/DRS%20Official%20Commitments%20from%20China%20through%202020.csv?dl=0). 2. This loan is omitted from the SAIS-CARI database of Chinese loan commitments that was released in July 2020. Nor is it included in the Chinese Overseas Development Finance Dataset published by Boston University’s Global Development Policy Center in December 2020. 3. The Chinese project title is 马拉维光纤骨干网二期项目. 4. China Eximbank also financed Phase 1 of the National Fibre Backbone Project (as captured via Project ID#52386). 5. The Government of Malawi loan instrument ID number is 2020007. 6. In July 2023, the Government of Malawi's Ministry of Finance informed AidData that China Eximbank ultimately did not approved its request from temporary debt service suspension via DSSI. On this point, also see https://datatopics.worldbank.org/dssitables/deferrals/annual/MWI

Number of official sources

10

Number of total sources

23