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Overview

CDB grants principal and interest payment deferral to Government of Zambia in October 2020

Commitment Year•2020Country of Activity•ZambiaDirect Recipient Country of Incorporation•ZambiaSector•Action Relating To DebtFlow Type•Debt rescheduling

Status

Project lifecycle

Completion

Pipeline: PledgePipeline: CommitmentImplementationCompletion

Timeline

Key dates

Commitment date
Oct 27, 2020

Stakeholders

Organizations involved in projects and activities supported by financial and in-kind transfers from Chinese government and state-owned entities

Funding agencies

State-owned Policy Banks

  • China Development Bank (CDB)

Receiving agencies

Government Agencies

  • Government of Zambia

Loan description

CDB grants principal and interest payment deferral to Government of Zambia in October 2020

Interest type•Fixed Interest Rate

Narrative

Full Description

Project narrative

On October 27, 2020, the Government of the Republic of Zambia announced that it reached an agreement with China Development Bank (CDB) to defer debt service on a Sinosure-backed commercial loan facility. Under the terms of the agreement with CDB, interest and principal due on October 25, 2020 was deferred. The deferred interest payment was made payable on April 25, 2021 and the deferred principal was rescheduled over the life of the facility.

Staff comments

1. One of five 'candidate' CDB loans was rescheduled through the October 27, 2020. By the timing of the October 2020 rescheduling, CDB had issued five loans to the Government of Zambia (that had exited or likely exited their grace periods). (1) A $30 million CDB loan in 2015 to Development Bank of Zambia (DBZ) for on-lending to SMEs (captured via Record ID#52190) (2) A $178.5 million CDB loan for the Safe City Project (captured via Record ID#57033) (3) A $175.92 million CDB loan in 2013 for Upgrading of Mansa-Luwingu Road Project (captured via Record ID#30719) (4) A $29.5 million CDB supplementary loan in 2016 for Upgrading of Mansa-Luwingu Road Project (captured via Record ID#53044) (5) A $170 million CDB loan in 2016 for the Solar-Powered Milling Plants Project (as captured via Record ID#52463) Record ID#52190 seems like a very unlikely candidate because it is known that DBZ was actively paying down the loan’s principal amount outstanding in 2021 and 2022. That leaves 4 candidate loans for 3 candidate projects. The one loan for the Safe City Project and the two loans for the Upgrading of Mansa-Luwingu Road Project are ‘credible candidates’. However, none of these loans are known to be supported by a Sinosure credit insurance policy, and the Zambian MOF has disclosed that the CDB loan that was rescheduled in October 2020 was supported by a Sinosure credit insurance policy. The CDB loan for the Solar-Powered Milling Plants Project is known to be supported by a Sinosure credit insurance policy, so it might be the most likely candidate (by ‘process of elimination’). As a result, the debt treatment is only applied to this loan. This issue warrants further investigation.