China extends $2billion credit facility to Angola
10-10-2018 13:06:00 | by: Bob Koigi | hits: 1782 | Tags:

The Republic of Angola and the People's Republic of China have signed a facilitation agreement providing for funding from the Chinese Development Bank, valued at $2 billion.

The credit line will serve to build and complete various infrastructures in progress in the country.

So far, the fundamental terms of this new legal agreement, such as the repayment time and the interest rate to be applied to Angola, are unknown.

The materialization of the agreement comes to an end to speculation that China is financing "$11 billion, intended to pay up to 85 percent of the contract value for the design, construction and finishing of the new Luanda International Airport" .

The legal instrument was signed by the Angolan Ministry of Finance and the Development Bank of China, as part of the State visit of Angolan President João Lourenço, which ends Wednesday in the Chinese capital.

This agreement appears in an adverse economic scenario for Angola, which seeks to recover from a strong economic and financial crisis, which began in November 2014, due to the fall in the price of a barrel of oil (Angola's main export commodity) in the international market.

Since then, the country has experienced a significant decrease in revenues, which led the Executive to approve a General State Budget in 2018, with an estimated GDP deficit of 2.9 percent, and a large part of the revenue destined for payment of debt.

Data from the National Statistics Institute, published by the newspaper Expansão, indicate that, in the first quarter of 2018, "the wealth generated in Angola fell by 2.2 per cent over the same period in 2017".

To counter budget deficits and re-launch the economy, Angolan authorities have been pursuing economic policies that involve greater control of banking and tax collection, as well as negotiations with international institutions.

Information circulated on Tuesday in Luanda showed the Angolan authorities' interest in negotiating a loan with the International Monetary Fund (IMF), whose interest rate would be approximately 4 percent.

China, considered the largest foreign financier of Angolan infrastructures, made its first credit line available to Angola in 2002.

Angola is estimated to have accumulated debt to that Asian country (up to 2018), estimated at US $ 23 billion, according to the Angolan authorities.

Chinese loans have been used to build a number of infrastructure projects, such as power stations, roads, bridges, hospitals and houses, encouraging economic development and improving the lives of the Angolan people.

Speaking about the new Chinese financing, the President of the Republic, João Lourenço, told the Prime Minister of China, Li Keqiang, that some priority projects have already been identified, for which he requests the earmarking of China's revenues.

These projects include the second phase of the Integrated Center for Public Security, the new Convention and Hotel Center, Luanda Water Supply System, Zenzo Hydroelectric Plant, Medium and High Voltage Connection of Huambo, Huíla and Namibe.

The Zenza-Cacuso rail link, the Luacano-Jimbe rail link, is also a priority for linking the Benguela Railway to Zâmbi, a road rehabilitation program and the new War.

Meanwhile, in addition to the USD 2 billion facilitation agreement, the delegations of Angola and the People's Republic of China initialed a Memorandum of Understanding between the Ministry of Commerce of China and the Ministry of Foreign Affairs of Angola.

The instrument concerns the establishment of commitments to the Agreement on the Reciprocal Protection and Promotion of Investments.

A Memorandum of Understanding on the Joint Implementation of Economic and Trade Measures of the Eight Actions of the Beijing Summit of the China-Africa Cooperation Forum was signed.

The negotiations also culminated in the signing of an Agreement between China and Angola to Eliminate Double Taxation on Income Tax Matters and Prevent Fraud and Fiscal Evasion.

At the same ceremony, which was attended by President João Lourenço and Chinese counterpart Xi Jinping, the two states signed an Agreement on Economic and Technical Cooperation and a Memorandum of Understanding between the Chinese Agency for International Development Cooperation and the Ministry of Foreign Affairs External Relations of Angola on Human Resources Development Cooperation.

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