Active Mixed AidData Chinese Aid

[Cancelled] China Eximbank cancelled $59.85 million for $197.39 million loan for Selected Township Roads on the Copperbelt (85%) Project (Linked to Record ID#57227)

$59.85M USD

Funder	Export-Import Bank of China (China Eximbank)
Recipient Organization	Government of Zambia
Country	Zambia
Start Date	Mar 15, 2018
End Date	Mar 13, 2029
Duration	4,016 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`107867`

Grant Description

[Cancelled] China Eximbank cancelled $59.85 million for $197.39 million loan for Selected Township Roads on the Copperbelt (85%) Project On March 15, 2018., the Government of Zambia and the Export-Import Bank of China signed a $197,391,777.85 buyer’s credit (loan) agreement for the Selected Township Roads on the Copperbelt (85%) Project.

📋 Loan / Grant Terms

💰 Loan Amountare unknown

However, it is known that the borrower was expected to use the proceeds of the loan to finance 85% of a $232,225,621 commercial contact between Zambia's Road Development Agency and AVIC International, which was signed in March 2017. The remaining 15% ($33,833,843.15) was to be directly funded by the Government of Zambia.

As of July 2022, the China Eximbank loan had achieved a 69.6% disbursement rate ($137,543,803.90 out of $197,391,777.85).

The scope of the project includes the engineering design, rehabilitation, upgrading and construction of approximately 152 km of selected township roads in Kitwe, Chingola and Mufulira districts within Copperbelt Province. The project also includes walkways, street lighting and traffic lights at selected junctions.

AVIC International is the general (EPC) contractor responsible for implementation. Construction began on June 25, 2017 and the project was expected to reach completion within 36 months (June 25, 2020). By December 31, 2018, the project had achieved a 37% completion rate. By December 31, 2019, it had achieved a 95% completion rate.

AVIC International halted construction in 2019, citing inconsistent disbursement of funds.

The Government of Zambia disbursed $59 million of its own funding in response, while expressing disappointment in AVIC International’s failure to reach the 20% local contractor subcontracting requirement. The Road Development Agency’s 2020 work plan characterizes this project as ongoing.

On July 29, 2022, the Ministry of Finance & National Planning (MOFNP) of Zambia announced that it was seeking lender approval to formally cancel the China Eximbank loan’s undisbursed balance ($59,847,973.95); however, it also noted that it had not yet secured formal lender approval for this action.

This announcement came approximately 21 months after the Government of Zambia defaulted on its repayment obligations to Eurobond holders and approximately 6 weeks after China, France, and 14 other countries formed a creditor committee to discuss the Zambian authorities’ request for a debt treatment under ‘the Common Framework for Debt Treatment beyond the DSSI’ endorsed by the G20 and the Paris Club.

📋 Staff Comments

This project is also known as the ZTR 1 Project, the Zambia Township Roads (Lot 1) Project, the Copperbelt Province Urban Road Lot 1 Project, the 152 km of Township Roads in Kitwe, Chingola and Mufulira (Lot 1) Project, and the Kitwe, Chingola, and Mufulira, Copperbelt Province Urban Road Lot 1, 152 km Project. The Chinese project title is 铜带城市道路升级改造项目 or 铜带城市道路升级改造项目 Lot1.
Due to the fact that the China Eximbank loan was used to finance 85% of the total cost of a commercial contract with AVIC International, AidData assumes that it was provided in the form of an export buyer’s credit. It is unclear if the export buyer’s credit is of a preferential nature or non-preferential nature. This issue warrants further investigation.
According to the World Bank's Debtor Reporting System (DRS), the weighted average grace period of all official sector lending from all Chinese creditors to government and government-guaranteed borrowing institutions in Zambia was 3.4733-years in 2018. AidData estimates the grace period of the China Eximbank loan that supported the Selected Township Roads on the Copperbelt (85%) Project by using this figure. See https://www.dropbox.com/scl/fi/uyz6w7q31x2o8i6rna7ug/DRS-May-2024-Extraction-Official-Chinese-Loan-Commitments-to-Zambia.xlsx?rlkey=n0a6270w91pdmmfyaoqva419r&dl=0 4. According to the World Bank's Debtor Reporting System (DRS), the weighted average maturity of all official sector lending from all Chinese creditors to government and government-guaranteed borrowing institutions in Zambia was 12.8605-years in 2018. AidData estimates the maturity of the China Eximbank loan that supported the Selected Township Roads on the Copperbelt (85%) Project by using this figure. See https://www.dropbox.com/scl/fi/uyz6w7q31x2o8i6rna7ug/DRS-May-2024-Extraction-Official-Chinese-Loan-Commitments-to-Zambia.xlsx?rlkey=n0a6270w91pdmmfyaoqva419r&dl=0 5. According to the World Bank's Debtor Reporting System (DRS), the weighted average interest rate of all official sector lending from all Chinese creditors to government and government-guaranteed borrowing institutions in Zambia was 5.728% in 2018. AidData estimates the interest rate of the China Eximbank loan that supported the Selected Township Roads on the Copperbelt (85%) Project by using this figure. See https://www.dropbox.com/scl/fi/uyz6w7q31x2o8i6rna7ug/DRS-May-2024-Extraction-Official-Chinese-Loan-Commitments-to-Zambia.xlsx?rlkey=n0a6270w91pdmmfyaoqva419r&dl=06. On July 2022, Zambia announced that it is cancelling certain projects in their entirety or cancelling undisbursed portions of certain Chinese loans unilaterally. 11 China Exim bank projects are cancelled, 3 ICBC projects are cancelled, 1 Jiangxi Bank project is cancelled. While it is unclear if the creditors agreed to this action, there is some evidence that shows the cancellation had ocurred. This issue warrants more investigation. The announcement can be accessed at https://www.dropbox.com/scl/fi/bxixfu3t97x14epaqayjv/MEASURES-TAKEN-REGARDING-SOME-LOAN-FINANCED-PROJECTS.pdf?rlkey=azvseog366a7ntoo93fjiatrj&e=3&dl=0

📚 Sources & References

Govt gets $470m loan from China for Lusaka
CB roads, 2017 Annual Report
Highlights from Cabinet Meeting released yesterday by Hon Dora Siliya LUSAKA - 22nd February, 2018, 2020 Road Sector Annual Work Plan
RDA Annual Report 2018
Chinese Loans to Africa Database
SAIS-CARI Loans China, 2018 Mid-Year Economic Review
中国对外承包工程国别（地区）市场报告 2019-2020
RDA 2019 Annual Report
Kitwe
Chingola road works resume
Avic ignores 20% subcontracting threshold
Kitwe road works slow due to funding challenges – Kang’ombe
Highlights from Cabinet Meeting released yesterday by Hon Dora Siliya LUSAKA - 22nd February, 2018
Zambia’s Chinese Debt in the Pandemic Era - Briefing Paper
Chinese firm hailed for improving road network in Zambia
AVIC International Revises Rates Of Materials Being Supplied To Sub-Contractors
中国对外承包工程国别（地区）市场报告2019-2020.pdf
MEASURES TAKEN BY THE GOVERNMENT ON THE IMPLEMENTATION OF LOAN FINANCED PROJECTS
Annual Economic Report 2018
Dipak drags Minister of Finance to court for contracting loans without parliament approval
China Eximbank Loans to Zambia 2018 Loan applications and disbursements are still being received and processed as the projects continue to evolve. Ongoing monitoring and evaluation are in place to ensure project continuity.

All Grantees

Government of Zambia

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