ICBC London provides $66 million loan — via cross currency swap facility agreement — to Reserve Bank of Malawi to shore up foreign exchange reserves and finance the government’s current account deficit in 2021 (Linked to Project ID#98519 and ID#98521)

In 2021, the Reserve Bank of Malawi (RBM) — Malawi’s central bank — signed a cross currency swap facility agreement with the London Branch of the Industrial and Commercial Bank of China (ICBC London). The borrowing terms of the loan are unknown. However, the IMF has characterized RBM’s swap debt as ‘short-term’ and ‘very expensive’. The 2022 borrowing was collateralized against a $32 million cash deposit in a bank account accessible to ICBC London. The purpose of the loan was to shore up the country’s foreign exchange reserves and finance the Government of Malawi’s current account deficit. The loan’s (principal) amount outstanding was $66 million as of December 2021. In November 2022, the IMF assessed ‘Malawi’s overall public debt […] to be in distress' and urged the Government of Malawi to scale down its ‘excessive use of short-term [swap] instruments by the RBM.’ RBM’s short-term borrowings from ICBC London in 2020 and 2022 are captured via Project ID#98519 and Project ID#98521.

Additional details

1. The maturity of the 2021 borrowing is unknown. However, in its audited financial statements, the RMB notes that its ‘currency swap agreements with various financial institutions […] are usually short term in nature with a maturity profile ranging between 3 months to 1 year.’ Therefore, AidData assumes for the time being that RBM’s 2021 currency swap (borrowing) agreement with ICBC London carried a 1 year maturity. This issue warrants further investigation.

Number of official sources

7

Number of total sources

8