Active Mixed AidData Chinese Aid

China Eximbank extends $6 billion master loan facility agreement to Angola (Linked to Record ID#66690)

$6M USD

Funder	Export-Import Bank of China (China Eximbank)
Recipient Organization	Government of Angola
Country	Angola
Start Date	Nov 18, 2009
End Date	Apr 19, 2030
Duration	7,457 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`34031`

Grant Description

China Eximbank extends $6 billion master loan facility agreement to Angola On November 28, 2003, the Chinese Government and the Angolan Government signed a framework agreement pertaining to a special economic cooperation arrangement (Agreement name in Chinese: 中华人民共和国商务部与安哥拉共和国财政部关于两国经贸合作特殊安排的框架协议).

Following the signing of the framework agreement, on November 18, 2009, China Eximbank and the Government of Angola entered into a $6 billion Master Loan Facility Agreement (MLFA), which was amended and reissued on June 8, 2011.

📋 Loan / Grant Terms

📅 Maturity17.5 years

⏳ Grace Period2.5 years

💹 Interest Rate3.6708%

Sonangol provided a source of collateral under the MLFA, and repayments were made with the proceeds of oil sales from Sonangol to UNIPEC (China international United Petroleum & Chemicals Co. Ltd, Sinopec group), which were deposited in an Angolan Ministry of Finance (MINFIN) account at China Eximbank.

The amount available under the MLFA was a function of the number of barrels of oil per day sold by Sonangol to Chinese importers designated by China Eximbank.

The amount available under the MLFA increased from a minimum of $3.0 billion to a maximum of $6.0 billion, with increments of $1.0 billion, depending on the number of barrels per day sold by Sonangol to China Eximbank's designated importers.

The MLFA was a framework agreement under which the Government of Angola and China Eximbank could conclude individual loan agreements (ILAs) for the purpose of financing up to 90% of the contract price owing to certain contractors in respect of certain contracts. $1.2 billion had been disbursed through the MLFA as of June 30, 2015 and $1.605 billion had been disbursed through the MLFA as of December 31, 2017 (as captured via Record ID#66690).

The amount outstanding under the MLFA was $1.19 billion as of December 31, 2021.

There are some indications that the Government of Angola's borrowings under the November 18, 2009 MLFA have financially underperformed vis-a-vis the original expectations of the lender.

As a result of the Government of Angola’s decision to avail itself of the G20's Debt Service Sustainability Initiative (DSSI), the MLFA and ILAs entered into by China Eximbank and the Government of Angola (described above) were under DSSI treatment and payments due by the Government of Angola under these finance agreements were suspended from May 1, 2020 until December 31, 2021.

📋 Staff Comments

AidData relies on the maturity, grace period, and interest rate that are recorded in the World Bank's Debt Reporting System (a 3.6708% interest rate, a 17.5-year maturity, and a 2.5-year grace period). See https://www.dropbox.com/s/ab8qt4n6jijcbhd/IDS_Average%20interest%20on%20new%20external%20debt%20commitments.xlsx?dl=0 and https://www.dropbox.com/s/949n5rctiue6d7c/IDS_Average_grace_period_and_maturity_on_new_external_debt_commitments.xlsx?dl=0 and https://www.dropbox.com/s/2sw4f7gluxa52fk/DRS%20Official%20Commitments%20from%20China%20Through%202021.xlsx?dl=0 and https://www.dropbox.com/s/0vpohwt96l40o19/World%20Bank%20DRS%20Extract%20Sep%202021%20--%20Chinese%20Loan%20Commitments%20from%202013%20to%202019.xlsx?dl=02. In July 2020, AidData asked Dr. Lucy Corkin, a leading expert on Chinese lending to Angola, whether the second, third, and fourth master loan facility agreements (MLFAs) that the Angolan Government signed with China Eximbank in 2007 and 2009 were structured as a buyer’s credit loans like the first MLFA that the Angolan Government signed with China Eximbank in 2004. Dr. Corkin noted that the second, third and fourth MLFAs were treated more like ceiling increases to the initial facility. Therefore, for the time being, AidData categorizes the second, third, and fourth MLFAs as buyer's credit loans.
Sinosure is assumed to be involved in this loan facility as the 2003 framework agreement (中华人民共和国商务部与安哥拉共和国财政部关于两国经贸合作特殊安排的框架协议) specified that Sinosure would be signing relevant agreements with the Government of Angola.
AidData considers this loan to be collateralized in a de facto sense. The cash desposited by the Angolan Ministry of Finance into a bank account controlled by China Eximbank is, for all intents and purposes, a source of collateral. This is true even if the lender does not have a formal security interest in the account.
On June 9, 2015, the Government Angola and China Eximbank entered into amendments of this MLFA and others in order to realign payments of drawn amounts under certain ILAs with the revised schedules of progress and/or completion of certain specified public investment projects, the timing and/or scale of which was altered when the revised 2015 national budget was adopted in March 2015.

📚 Sources & References

REQUEST FOR INFORMATION ON CHINESE ENGAGEMENT IN ANGOLA AND POTENTIAL AREAS FOR COOPERATION
China in Angola: The Pros and Cons of China’s Aid Structure.
Bartering Globalization: China’s Commoditybacked Finance in Africa and Latin America
China and Oil-backed Loans in Angola: The Real Story
Chinese Loans to Africa Database
Eastern Promises: New Data On Chinese Loans in Africa, 2000 to 2014
THE REPUBLIC OF ANGOLA U.S.$500,000,000 9.375 per cent. Notes due 2048, 2015 Government of Angola Bond Prospectus
Decreto Presidencial n.º 208/11
Diário da República n.º 146
Resolução n.º 124/09
Diário da República n.º 245
China’s Oil Diplomacy: Comparing Chinese Economic Statecraft in Angola and Brazil
UNCOVERING AGENCY: ANGOLA’S MANAGEMENT OF RELATIONS WITH CHINA
The EU and China in African Authoritarian Regimes: Domestic Politics and Governance Reforms
Global Medium Term Note Programme 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.