China Eximbank suspends debt service payments on two government concessional loans in March 2021 (Linked to Record ID#1043, 819)

In response to the COVID-19 pandemic and the G20 Finance Ministers and Central Bank Governors meeting that took place on April 15, 2020 and on November 13, 2020, the Chinese Government agreed to work with other G20 members to implement the Debt Service Suspension Initiative (DSSI). Then, on March 21, 2021, China Eximbank and the Government of Kenya signed a debt suspension agreement.

Under the terms of the agreement, the lender agreed to suspend principal and interest payments due during the March 21, 2021-June 30, 2021 period under multiple government concessional loan (GCL) agreements with outstanding balances: a 2006 China Eximbank GCL for Phase 1 of the Kenya Power Distribution System Modernization and Strengthening Project (loan identification number 2006007 in the Government of Kenya’s external public debt register) and a 2006 China Eximbank GCL for the Rural Telecommunication Development Project (loan identification number 2006008 in the Government of Kenya’s external public debt register).

The total estimated suspension amount was RMB 14,602,224.81.

However, at the time that the parties signed the debt suspension agreement, they both acknowledged that the total suspension amount would ultimately be determined at the end of the suspension period (since loan disbursements could be made during the suspension period and the lender agreed to suspend the payment of interest accrued on any disbursements during the suspension period).

The lender and borrower agreed that the suspension of debt service would be undertaken on a net present value (NPV)-neutral basis.

Therefore, the borrower agreed to pay interest accrued on the amount outstanding under the total suspension amount (‘Suspension Interest’) by paying the Suspension Interest on the amount outstanding under each loan agreement’s suspension amount at the same rate of interest set forth in the original loan agreement.

Under the terms of the debt suspension agreement, the lender and the borrower also agreed that ‘[t]he suspension interest on the amount outstanding under the Suspension Amount concerning each Loan Agreement shall be calculated on the basis of the actual number of days elapsed and a year of 360 days, from and including the Repayment Date/Repayment Date of Principal and Interest falling within the Suspension Period to the date of payment in full of the corresponding Suspension Amount, and shall be paid in arrears on each Interest Payment Date under the corresponding Loan Agreement.’ The borrower also agreed that (1) ‘it shall continue to perform all its obligations […] under the Loan Agreements as supplemented and amended by [the debt suspension agreement]’; (2) ‘it shall use the created fiscal space to increase social, health, or economic spending in response to the COVID-19 crisis […]’ and ‘work closely with the International Financial Institutions who are expected to put in place a monitoring system’; (3) ‘it shall disclose to the Lender all Public Sector Financial Commitments (as defined in the Government Finance Statistics Manual 2014 (GFSM2014)), respecting commercially sensitive information’; and (4) ‘it shall contract no new non-concessional debt during the Suspension Period, other than agreements under the DSSI’.

The amount outstanding under the new, RMB 14,602,224.81 China Eximbank loan instrument was RMB 14,602,224.81 as of June 30, 2021 and RMB 14,602,224.81 as of June 30, 2022.