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Uganda’s big China debt

As of June 2018, Kasaija says, Uganda had signed five agreements with Escrow Account clauses. Together, they hold over Shs150 billion. This is more money that some ministries, including Trade and Industry, Tourism, ICT, and National Guidance got in the 2018/19 nation budget. And Kasaija warns that money deposited on the Chinese escrow accounts is expected to grow as the loans disburse until they are fully paid off.

The current escrow account monies are National Backbone &E-Government Phase III Repayment Current Reserve Current Account US$311,000 (Approx. 1.2 billion), Kampala-Entebbe Airport Expressway Escrow US$7 million (Approx.Shs27 billion), Nsimba Hydropower Project US$9.7 million (Approx. Shs37.6 billion), Aviation Authority US$4 million (Approx. Shs15 billion), and Karuma Hydropower Dam US17.6 million (approximately Shs68.4 billion).

Local content breached

Kasaija is also concerned about China’s insistence that “the good, technologies and services” purchased by using the proceeds of the loan shall be purchased from China preferentially.

“We find this contrary to the cabinet directive on BUBU and Local Content policy,” Kasaija notes.

The Local Content policy is designed to promote participation of Ugandans and Ugandan enterprises on projects, build local capacity, and direct foreign companies to transfer technology to locals. Under the policy, a minimum of 33% of project inputs must be sourced locally from Uganda. Areas covered under the Local Content Policy include earth materials like sand, gravel, and aggregate, cement and steel, and labour, and other locally available inputs.

Kasaija’s warning to Museveni comes when concern is rising over Uganda’s national debt; especially its China component.

National debt from foreign and domestic lenders has grown exponentially in the last five years and there is a fear that if the current trend of borrowing persists, the debt could become difficult to pay.

Strident anti-debt calls have been made by many; from the Auditor General to the IMF/World bank and foreign donor embassies and Civil Society Organisations like the Uganda Debt Network (UDN).

The current Parliament, which is mandated by law to approve all government borrowing, has passed about 10 loans in quick succession in its two years and another five loans are currently under considerations, according UDN; which is a civil society group that monitors national debt performance.

“We approve a new loan every week,” said an MP on a recent radio talk show.

As a result, the public debt has increased by 22% from Shs34 trillion in June 2017, to Shs42.51 trillion by June 30, 2018, according to the 2018 Auditor General’s report released on Jan.04.

Although the furor over growing debt has been simmering for some time, many are now pointing at this latest Auditor General’s report which appears to pour fuel on it.

National assets at risk

At the handover of the report to Rebecca Kadaga; the Speaker of Parliament, the AG John Muwanga warned that Uganda has taken on some significant value loans that have such stringent conditions that they could complicate Uganda’s ability to pay them sustainably.

He said in some cases, Uganda has waived its sovereign immunity and that of properties used as collateral in case matters go to court.

He exposed how Uganda has also agreed to abide by foreign laws in any proceedings to enforce agreements, and agreed to pay all legal fees and insurance premiums on behalf of the creditor in such cases.

At the handover of the report, the Deputy AG, Keto Nyapendi Kayemba, also expressed concern.

“We’re taking in more loans whose conditionalities are probably not very conducive for us as a country,” she said.

Despite such warnings, the government has continued to borrow. The deafness of the government now appears to have made those telling the story of Uganda’s national debt to realise that for it to have the greatest impact, it must have a villain. They have chosen China to be the villain. This appears to be the fuel in the “China to grab Uganda assets” war cry.

7 comments

  1. I hope what am reading is FALSE. Because If our treasured assets, that God gave us become taken, then what is the essence of the loan. Where is the justification for the Loan?, and what will the future generations call Us?. We are meant to be smarter and we should be having a projection that after say 100 years, we will be at a developed, date free, self sustaining with ability to even give loans to other countries.

  2. well we r looking at the present as ugandans not at the future i live abroad but here where i live these pipo have developed in term of construction roads railylines infrastructure but they too u here the loan is gonna paid in 50 yrs but remember the chineses r not going to take away our roads our buildings it will still stay in our country and the worst part is ugandans r looking up to m7 hes gonna leave and all will stay comeon ugandans

    • ejakait engoraton

      I do not think for one moment, going by your remarks, that you understand what this article is about.

      Wherever it is you live abroad, please stay there peacefully and enjoy your stay, these things are way above your pay grade.

    • Musisi Williams

      I think today beholds the future what’s the use of the roads when our historic sites are controlled by another state this only takes us back to the colonial times and Amin’s move to chase the Indians if we accept such loans in desire for infrastructure we are laying tough times for our children hope you can see this fellow Ugandans

  3. Is-hâq Abdulrahman

    We putting in national assets as collateral security while getting the loans isn’t a good idea at all because according to the way I see our dear country Uganda, the current state of our economy isn’t that pleasing. So shall we be working only to repay debts, and certainly we might fail to pay that debt meaning our country will cease to be our own and belong to foreigners instead just because we borrowed printed paper valued as money. Let our leaders think beyond their noses otherwise ‘ pearl of Africa’ is headed for doomsday….

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