China's N$10bn loan still on table

12 September 2019 | Economics

The government is yet to take up the Chinese government offer to borrow up to N$10 billion through the Export-Import Bank of China.

It also appears that the government will not make a decision before next year at the earliest on whether to take up the loan or not.

The Chinese government made the offer at the Forum for China Africa Cooperation summit that was held in Beijing last year. It forms part of a US$60 billion pledge made to African countries by the Chinese government.

Namibia's portion of the money was earmarked for infrastructure projects and included the development of 400 houses as well as the expansion of Hosea Kutako International Airport.

Shedding light on the latest developments pertaining to the loan offer, ministry of finance spokesperson Tonateni Shidhudhu said feasibility studies were still being done before the government could make a final decision.

“Government has not yet drawn from this facility, due to uncompleted feasibility studies that are yet to be concluded hopefully during 2020,” said Shidhudhu.

“As per the signed memorandum of understanding on cooperation mechanism between the Export-Import Bank of China (Exim Bank) and the ministry of finance, the government of the People's Republic of China, through Exim Bank, provided a funding provision of N$10 billion to the government of the Republic of Namibia for development projects,” he added. Media reports last year suggested that the government's request for funding for infrastructure projects was accepted at the summit by the Chinese government.

Under the arrangement, the Exim Bank would provide a government concessional loan and preferential export buyers' credit.

Procedurally, the Exim Bank would collect project information and launch a pre-lending investigation. The Exim Bank would then conduct project evaluation and submit reports to relevant government authorities.

For a government concessional loan, based on the framework loan agreement signed between the Chinese government and the government of the borrowing country, the Exim Bank signs a project loan agreement with the borrower.

For preferential export buyer's credit, the Exim Bank signs a project loan agreement upon approval by the relevant government authorities, the Chinese lender explains on its website.

Shidhudhu said Namibia could benefit significantly from the offer, as this was one of the cheapest forms of funding long-term projects with a long repayment period.

Namibia's loan exposure to China stood at N$1.7 billion as at September 2018, with concessional loans making up the bulk at N$1.3 billion and the remainder coming in the form of interest-free loans.

OGONE TLHAGE

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