By DICTA ASIIMWE
In Summary
- Uganda has borrowed $48 million from two German banks to construct an inland port at Bukasa on the shores of Lake Victoria, in a move that is aimed at widening the database of non-concessional lenders.
- AKA Bank and Commerzbank AG are the two German banks that have lent Uganda the money to construct Bukasa port.
- But Dr Fred Muhumuza, an economist and former advisor to the Ministry of Finance said Bukasa is not an economically viable port as it is reportedly shallow, and will require a lot of dredging, before it can be used by big modern ships.
Uganda has borrowed $48 million from two German banks to
construct an inland port at Bukasa on the shores of Lake Victoria, in a
move that is aimed at widening the database of non-concessional lenders.
Over the past eight years, Uganda has invested heavily in
infrastructure and the increasing cost and number of projects has caused
the country to look beyond concessional lenders like the World Bank,
African Development Bank and Western governments to China, which had
become a popular option.
But reports of Chinese reluctance appear to have forced Uganda
to look at other institutions that can provide funding for
infrastructure. These include the German banks which are now showing
interest in lending more to Uganda.
Speaking at the signing ceremony of the Bukasa port loan
agreement, Doris Icke, the senior vice president for European Export and
Trade Bank (AKA Bank) said the new deal represented an opportunity for
Uganda to access funding for other projects in future. AKA Bank and
Commerzbank AG are the two German banks that have lent Uganda the money
to construct Bukasa port.
The loan will be paid back within 15 years, at an interest rate
of the Eurobond average rate plus 1.8 per cent. At the moment, this
translates into an interest rate of 2 per cent, per annum. Uganda will
provide $8.5 million in counterpart funding to make a total project cost
of $56.4 million.
“The project, which is part of the Central Corridor Development
Programme aims to secure an alternative way of providing efficient
transport systems between Uganda and the world markets,” said Finance
Minister Matia Kasaija, during the signing ceremony of the loan
agreement.
But Dr Fred Muhumuza, an economist and former advisor to the
Ministry of Finance said Bukasa is not an economically viable port as it
is reportedly shallow, and will require a lot of dredging, before it
can be used by big modern ships.
This will increase the cost of construction, yet it is not a
strategic port since Uganda exports and imports less through Dar es
Salaam — about 80 per cent of Uganda’s international trade goes through
Mombasa port.
Having borrowed at least $3.3 billion in non-concessional
financing from China Exim bank for infrastructure project but some
experts including some of the lenders, suggest that Uganda needs to slow
down debt acquisition.
Sources that attended meetings to negotiate financing for the
standard gauge railway-another China funded project, say that there are
jitters over Uganda’s capacity to back pay this money.
As a result, the Chinese told Ugandan representatives
negotiating financing for the Malaba-Kampala section of the Standard
Gauge railway that the country should look at options to reduce cost
from the current $2 billion.
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