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ICBC London provides $28 million 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 2022 (Linked to Record ID#98519 and #98520)
| Funder | Industrial and Commercial Bank of China (ICBC) |
|---|---|
| Recipient Organization | Reserve Bank of Malawi (RBM) |
| Country | Malawi |
| Start Date | Jan 01, 2022 |
| End Date | Jun 20, 2033 |
| Duration | 4,188 days |
| Number of Grantees | 1 |
| Roles | Recipient |
| Data Source | AidData Chinese Aid |
| Grant ID | 98521 |
Grant Description
ICBC London provides $28 million 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 2022 In 2022, 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).
However, the IMF has characterized RBM’s swap debt as ‘short-term’ and ‘very expensive’. The 2022 borrowing was collateralized against a $7 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 $47.48 million as of March 2022, $28 million as of December 2022, and $0 as of July 2023.
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 2020 and 2021 are captured via Record ID#98519 and Record ID#98520.
Staff Comments
1. The maturity of the 2022 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 2022 currency swap (borrowing) agreement with ICBC London carried a 1-year maturity. This issue warrants further investigation.
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
- PT Bumi Resources Tbk Offer to Exchange the CIC Loan at the option of Country Forest Limited
- 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.
All Grantees
Reserve Bank of Malawi (RBM)
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