Active Development AidData Chinese Aid

ICBC London provides loan — via cross currency swap facility agreement — to Reserve Bank of Malawi to shore up foreign exchange reserves and finance the government’s current account deficit in 2020 (Linked to Record ID#98520 and #98521)

$61.27M USD

Funder	Industrial and Commercial Bank of China (ICBC)
Recipient Organization	Reserve Bank of Malawi (RBM)
Country	Malawi
Start Date	Jan 01, 2020
End Date	Aug 26, 2028
Duration	3,160 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`98519`

Grant Description

ICBC London provides loan — via cross currency swap facility agreement — to Reserve Bank of Malawi to shore up foreign exchange reserves and finance the government’s current account deficit in 2020 In 2020, the Reserve Bank of Malawi (RBM) — Malawi’s central bank — signed a cross currency swap facility agreement with the London Branch of the Industrial and Commercial Bank of China (ICBC London).

📋 Loan / Grant Terms

💰 Loan Amountare unknown

However, the IMF has characterized RBM’s swap debt as ‘short-term’ and ‘very expensive’. The 2020 borrowing was collateralized against a $27 million cash deposit in a bank account accessible to ICBC London.

The purpose of the loan was to shore up the country’s foreign exchange reserves and finance the Government of Malawi’s current account deficit. The loan’s (principal) amount outstanding was $61.27 million as of June 2020.

In November 2022, the IMF assessed ‘Malawi’s overall public debt […] to be in distress' and urged the Government of Malawi to scale down its ‘excessive use of short-term [swap] instruments by the RBM.’ RBM’s short-term borrowings from ICBC London in 2021 and 2022 are captured via Record ID#98520 and Record ID#98521.

📋 Staff Comments

The maturity of the 2020 borrowing is unknown. However, in its audited financial statements, the RMB notes that its ‘currency swap agreements with various financial institutions […] are usually short term in nature with a maturity profile ranging between 3 months to 1-year.’ Therefore, AidData assumes for the time being that RBM’s 2020 currency swap (borrowing) agreement with ICBC London carried a 1-year maturity. This issue warrants further investigation.
The face value of the RMB’s 2020 cross currency swap facility agreement with ICBC London is unknown. For the time being, AidData relies on the amount outstanding ($61.27 million) as of June 2020 as a proxy.

📚 Sources & References

Reserve Bank of Malawi Consolidated and Separate Annual Financial Statements For the year ended 31 December 2021
Ministry of Finance and Economic Affairs of Malawi Annual Public Debt Report 2021/2022
IMF Country Report No. [22/352] (Malawi
November 2022)
Ministry of Finance of Malawi Annual Public Debt Report 2020/2021
Reserve Bank of Malawi Consolidated and Separate Annual Financial Statements For the year ended 31 December 2022
Reserve Bank of Malawi Consolidated and Separate Annual Financial Statements For the year ended 31 December 2020
Malawai Joint Work Bank-IMF Debt Sustainability Analysis
Data on disbursements repayments and amounts outstanding under ICBC London facilities 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.