China Eximbank suspends debt service payments under buyer’s credits with Republic of Congo between July 2021 and December 2021

In response to the COVID-19 pandemic and the G20 Finance Ministers and Central Bank Governors meeting that took place on April 15, 2020 and on November 13, 2020, the Chinese Government agreed to work with other G20 members to implement the Debt Service Suspension Initiative (DSSI). As part of DSSI, China Eximbank and the Republic of Congo signed a debt suspension agreement during calendar year 2021 (most likely in July 2021). Under the terms of the agreement, the lender agreed to suspend principal and interest payments due between July 1, 2021 and December 31, 2021 under one or more buyer’s credit loan agreements. The total estimated suspension amount was $46,221,628.21. At the time that the parties signed the debt suspension agreement, they both acknowledged that the total suspension amount would ultimately be determined at the end of the suspension period (since loan disbursements could be made during the suspension period and the lender agreed to suspend the payment of interest accrued on any disbursements during the suspension period). The lender and borrower agreed that the suspension of debt service would be undertaken on a net present value (NPV)-neutral basis. Therefore, the borrower agreed to pay interest accrued on the amount outstanding under the total suspension amount (‘Suspension Interest’) by paying the Suspension Interest on the amount outstanding under each loan agreement’s suspension amount at the same rate of interest set forth in the original loan agreement. Under the terms of the debt suspension agreement, the lender and the borrower also agreed that ‘[t]he suspension interest on the amount outstanding under the Suspension Amount concerning each Loan Agreement shall be calculated on the basis of the actual number of days elapsed and a year of 360 days, from and including the Repayment Date/Repayment Date of Principal and Interest falling within the Suspension Period to the date of payment in full of the corresponding Suspension Amount, and shall be paid in arrears on each Interest Payment Date under the corresponding Loan Agreement.’ The borrower also agreed that (1) ‘it shall continue to perform all its obligations […] under the Loan Agreements as supplemented and amended by [the debt suspension agreement]’; (2) ‘it shall use the created fiscal space to increase social, health, or economic spending in response to the COVID-19 crisis […]’ and ‘work closely with the International Financial Institutions who are expected to put in place a monitoring system’; (3) ‘it shall disclose to the Lender all Public Sector Financial Commitments (as defined in the Government Finance Statistics Manual 2014 (GFSM2014)), respecting commercially sensitive information’; and (4) ‘it shall contract no new non-concessional debt during the Suspension Period, other than agreements under the DSSI’.

Additional details

1. AidData assumes that the same basic terms and conditions that governed China Eximbank’s DSSI (debt suspension) agreement with other governments also applied to its DSSI agreement that it signed with the Republic of Congo. Illustrative DSSI agreements can be accessed via https://www.dropbox.com/s/huwa695j3w9hwig/DSSI%20Agreement%20for%20Kyrgyz%20Republic.pdf?dl=0 and https://www.dropbox.com/s/67n1oq44it27kvu/3.%20Debt%20Suspension%20Agreement%20for%20GCL%20Other%20Projects.pdf?dl=0 and https://www.dropbox.com/s/n69i598f0fg7s80/6.%20Debt%20Suspension%20Agreement%20for%20PBC%20C2.pdf?dl=0. 2. More research is needed to identify the specific loans that were affected by this DSSI treatment (debt service suspension). According to the March 2023 World Bank-IMF Debt Sustainability Analysis (DSA) for Congo, "[t]he DSA includes the rescheduling—according to published terms—of all eligible debt, with the exception of debt under the Strategic Partnership loans from China, which the creditors have not agreed to reschedule and for which the authorities have continued making payments." See https://documents1.worldbank.org/curated/en/099220503022313177/pdf/BOSIB08f099df703e0b0540dd698cc66f60.pdf. The Strategic Partnership (“Partenariat Stratégique”) refers to a set of oil-backed loan framework agreements signed by China Eximbank and the Congolese Government between 2006 and 2013 (as captured via Umbrella Project ID#60219, 30235, and 59273).

Number of official sources

7

Number of total sources

8