Completed Mixed AidData Chinese Aid

[Disbursed] China Eximbank disbursed $69.89 million for $204.94 million loan for Phase 3 of Lusaka Urban Roads (L400) Upgrade Project (Linked to Record ID#57194, #57218, #31329, #107866)

$69.89M USD

Funder	Export-Import Bank of China (China Eximbank)
Recipient Organization	Government of Zambia
Country	Zambia
Start Date	Mar 15, 2018
End Date	Mar 18, 2029
Duration	4,021 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`57190`

Grant Description

[Disbursed] China Eximbank disbursed $69.89 million for $204.94 million loan for Phase 3 of Lusaka Urban Roads (L400) Upgrade Project In January 2017, the Industrial and Commercial Bank of China (ICBC) and the Government of Zambia signed a $36,165,914 loan agreement for Phase 3 of the Lusaka Urban Roads (L400) Upgrade Project (captured via Record ID#57194).

Then, on March 15, 2018, China Eximbank and the Government of Zambia signed a $204,940,174.80 loan agreement for Phase 3 of the Lusaka Urban Roads (L400) Upgrade Project (captured via Record ID#57190). The borrowing terms of these loans are unknown.

The proceeds of the China Eximbank loan were to be used by the borrower to finance 85% of the cost of a $241,106,088 commercial contract between the Road Development Agency (RDA) of Zambia and AVIC International Project Company Limited, which was signed in October 2016.

The proceeds of the ICBC loan were to be used by the borrower to finance 15% of the cost of the same commercial contract between the Road Development Agency (RDA) and AVIC International Project Company Limited.

As of July 2022, the China Eximbank loan had achieved a 34.1% disbursement rate ($69,888,074.40 out of $204,940,147.80). The purpose of Phase 3 was to upgrade 116 km of urban roads in Lusaka and a number of street and signal lights.

The construction of a dual carriageway from the Kenneth Kaunda International Airport to the airport traffic circle was also added to project scope.

AVIC International Project Company Limited appears to have served as the general (EPC) contractor responsible for project implementation. However, Henan Overseas Engineering Construction Co., Ltd (HOEC) was also involved in implementation. Construction began in June 2017, and the project was originally expected to reach completion in 2021.

It ultimately reached completion on December 18, 2020. The project ultimately resulted in the surfacing of approximately 144 km of roads.

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 of $135,052,100.40; 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

SAIS-CARI identifies China Jiangxi Corporation for International Economic and Technical Cooperation (CJIC) as the contractor responsible for implementation. However, multiple official sources (including MOFCOM and HOEC) identify AVIC and HOEC as the contractors responsible for implementation.
In the database of Chinese loan commitments that it released in July 2020, SAIS-CARI records Bank of China rather than ICBC as the source of the $36 million loan for Phase 3. AidData records ICBC as the source of the loan because Chief Government Spokesperson Dora Siliya explicitly identified ICBC as the lender in a 2018 public announcement.
In 2013, China Eximbank provided a loan for Phase 1 of the L400 Project (captured via Project ID#31329). In 2016, China Eximbank provided a loan for Phase 2 of the L400 Project (captured via Project ID#57218).
This project is also known as the Lusaka Urban Road (L400) Upgrade, 400 km, Phase III Project. The Chinese project title is 卢萨卡城市交通系统升级改造(L400)项目三期 or 赞比亚L400市政道路升级改造三期项目.
Zambia’s Ministry of Finance identifies the name of the project supported by this loan as ‘REHAB OF URBAN RDS PHASE III’.
The entire L400 project involves the construction of 408 kilometers of road, one grade-separated junction, and 90 kilometers of walkways, as well as the re-engineering 10 junctions in the capital city and province of Lusaka. Phase 2 and Phase 3 of the L400 project appear to have some overlap, including in the rehabilitation of Lumumba road, which is quoted by Zambia's Road Development Agency (RDA) as being included in Phase 2 construction, but appears to have been financed with the $241 million used in Phase 3.
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 CDB loan that supported Phase 3 of the Lusaka Urban Roads (L400) Upgrade 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 8. 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 CDB loan that supported Phase 3 of the Lusaka Urban Roads (L400) Upgrade 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 9. 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 CDB loan that supported Phase 3 of the Lusaka Urban Roads (L400) Upgrade 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=010. 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
Leveraging Chinese FDI For Diversified Growth In Zambia
RDA starts phase 2 Lusaka roads rehabilitation, 2018 Mid-Year Economic Review, 2020 Road Sector Annual Work Plan
RDA explains Lumumba road project by AVIC
The decisions of Cabinet at its 3rd sitting on Monday 19th February, 2018
Govt gets $470m loan from China for Lusaka
CB roads, 2018 Road Sector Annual Work Plan
SAIS-CARI Loans China
中国对外承包工程国别（地区）市场报告 2019-2020
REPORT OF THE COMMITTEE ON GOVERNMENT ASSURANCES FOR THE FOURTH SESSION OF THE TWELFTH NATIONAL ASSEMBLY
L400 To Open Chongwe Market
Government borrowed US$2.6 billion last year despite debt pile up, 2018 Annual Economic Report
Siliya unveils Cabinet resolutions on Infrastructure
NPA
AIDS
Medical Stores
Zambia’s Chinese Debt in the Pandemic Era - Briefing Paper
Govt gets 470m loan from china for lusaka cbroads
中国对外承包工程国别（地区）市场报告2019-2020.pdf
Report of the Expanded Budget Committee on the Estimates of Revenue and Expenditure for the Year 1st January to 31st December 2020, 2018 ANNUAL PROGRESS REPORT SEVENTH NATIONAL DEVELOPMENT PLAN (7NDP: 2017-2021)
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.