Chinese financial support to Angola approaches US$ 7 billion

22 October 2007

Luanda, Angola, 22 Oct – Financial support pledged by China for the reconstruction of Angola stands at nearly US$ 7 million and is targeted at projects including the new city of Luanda and the capital’s international airport, the Angolan government has said.

Figures on China’s aid funding, consisting of two credit lines of US$ 2 billion each from China’s Eximbank and an additional US$ 2.9 billion from China International Fund (CIF), were made public last week by the Luanda Finance Ministry.

The latter credit facility will fund the Luanda International Airport, the Caminhos de Ferro de Luanda railway project, drainage systems in the capital and studies on the new city of Luanda, as well as work on the Luanda-Lobito, Malanje-Saurimo, Saurimo-Dondo and Saurim-Luena highways.

“As with the Eximbank facility, disbursal of credit is made through direct payments to contractors and their Chinese suppliers,” Angola’s finance ministry said in a statement.

According to figures recently published by the World Bank, the CIF credit line has an anticipated total of US$ 9.8 billion.

Created in 2005, CIF allowed “the creation of credit lines to fund projects in the scope of the Office of National Reconstruction” and to “obtain new financing under more competitive conditions” and “promote a spur to risk capital via national and international private investment,” the finance ministry added.

There are currently some “restrictions on the part of CIF in the mobilization of funds to finish present projects and for the beginning of new ones,” so the government has found a temporary solution.

This solution, adds the finance ministry, consists of “obtaining funds of US$ 3.5 billion on the national market through the issue of treasury bonds, which will allow continuity in the main programs being coordinated by the Office of National reconstruction.”

Application of funds from the CIF credit line is being directly managed by the Office of National Reconstruction, chaired by Helder Vieira Dias, a close ally of President José Eduardo dos Santos.

In an interview published in the Financial Times last week, Angola’s assistant prime minister, Aguinaldo Jaime, said the CIF credit “is not completely commercial and more political” and “probably negotiated at the highest level.”

“It is a concession loan and it is believed that some credits have not been paid,” said Jaime, a key figure in the drawing up of the Angolan government’s economic policy.

CIF, based in Hong Kong, is an arm of Beiya International Development, linked to China’s oil imports from Angola, which has become one of the main suppliers to China of this strategic raw material.

According to the figures released last week by Angola’s finance ministry, total funds available from the Eximbank credit are US$ 4 billion.

The first tranche of US$ 2 billion was applied in two different stages, of equal amounts, and 27 contracts were signed in the first, corresponding to 50 projects, of which 21 have been completed.

“These projects are mainly in the areas of energy, water, healthcare, education and public works, each with around 20 percent of the total value funded,” the finance ministry said.

Some US$ 733.2 million has already been disbursed in the first phase and the balance available at the end of September was US$ 1.6 million. At the same time, US$ 5.5 million was available in the second phase and US$ 199.8 million of this already released.

“Until now, 13 contracts have been made in the second phase corresponding to 52 projects that are in progress. These contracts are in the sectors of telecommunications, fisheries, healthcare, education and public works. To complete this second stage there is a contract under preparation, known as EDEL II, and two other contracts in the final stages of negotiation, also in the energy and water sectors,” the official statement added.

Thus, total disbursal under the first Eximbank credit line has reached US$ 932.9 million, according to the Angolan finance ministry figures.

“As a result of the positive evaluation made by the two parties in relation to the first package of US$ 2 billion, signed on the 20th June, 2006 between the Angolan Finance Ministry and Eximbank of China, a memorandum of understanding envisages new funding of the same amount,” added the official statement.

Angola and China’s current financial relations are governed by an accord signed in November 2003, which established the foundations for new bilateral economic and trade cooperation.

The first credit accord with Eximbank was signed four months later, aimed to fund public investment projects proposed by Angola and approved by a Joint Working Group. (macauhub)