China Eximbank suspends debt service payments from Government of Sierra Leone between May 2020 and December 2020 (Linked to Record ID#95666 and #105747)

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).

As part of DSSI, China Eximbank and the Government of Sierra Leone signed a debt suspension agreement during calendar year 2020 (most likely between May 2020 and July 2020).

Under the terms of the agreement, the lender agreed to suspend principal and interest payments due between May 1, 2020 and December 31, 2020 under one or more loan agreements (as captured via Record ID#95667).

According to the World Bank, the total suspension amount was $1,805,035.60, including $1,740,072.80 in principal payments and $64,962.70 in interest payments.

According to Sierra Leone’s Ministry of Finance, the total suspension amount was RMB 12,448,300 and the borrower made repayments worth RMB 4,149,400 during calendar year 2022.

Then, in 2021, Sierra Leone and China Eximbank signed two debt suspension agreements: under the terms of the agreements, the lender agreed to suspend principal and interest payments due between January 1, 2021 and June 30, 2021 (as captured via Record ID#95666) as well as July 1, 2021 and December 31, 2021 (as captured via Record ID#105747) under one or more loan agreements.

According to the World Bank, the total estimated suspension amount was $3,823,000 (with suspended principal payments worth $3,236,000 and suspended interest payments worth $587,000).

According to Sierra Leone’s Ministry of Finance, the total suspension amount for the 2nd DSSI period (January-June 2021) was RMB 4,340,400 and the amount for 3rd DSSI period (July-December 2021) was RMB 7,897,000.

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

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 each 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’.