China Eximbank provides $132 million concessional loan for TmCel Telecommunications Network Expansion and Modernization Project

Project narrative

On October 1, 2020, China Eximbank and the Government of the Republic of Mozambique signed a $132,000,000 concesional loan agreement to finance the Telecommunications Network Expansion and Modernization Project of Moçambique Telecom SA (Tmcel). The loan carries the following borrowing terms: a maturity of 20 years, a grace period of 6.5 years, and a 2% interest rate. The purpose of the project is to expand and modernize the telecommunication network of Moçambique Telecom SA (Tmcel) such that it can accommodate 4G technology. Huawei Technologies Co., Ltd. is the contractor responsible for the implementation of the 4G project. Project implementation commenced on or around January 2022. There are some indications that the China Eximbank loan for the TmCel Telecommunications Network Expansion and Modernization 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).