Uganda has been forced to take out another loan from a commercial bank as alternatives wane. With Kampala under pressure to fund energy and transportation-related projects, the amount of debt owed to commercial banks has reached USD 2 billion.
Uganda has been working to settle Umeme Ltd’s exit claims from a 20-year power distribution concession that ends this month by obtaining a USD 190 million loan from a consortium of regional banks.
Although Stanbic Bank Uganda is the primary arranger, there is currently little information available about the other banks involved or the relevant interest rates. The loan request was approved by Parliament recently.
Government insiders claimed that in addition to the more than USD 1 billion required to finance the standard gauge railway project, an additional USD 50 million is needed for the recapitalization of the Uganda Electricity Distribution Company, Umeme’s successor, and this money will be raised from commercial lenders.
According to Uganda’s September 2024 debt sustainability analysis report, commercial banks own 12% (USD 1.73 billion) of the nation’s external debt.
In contrast, multilateral creditors, such as the World Bank and International Monetary Fund, hold the majority (65%, or USD 9.77 billion), with bilateral creditors, including China, holding 23% (USD 3.41 billion).
“We are communicating to investors that in order to carry out specific projects and spending commitments, more commercial borrowing is needed. In the short term, the new commercial loans will increase our debt-to-GDP ratio to 46.8%,” Deputy Secretary to the Treasury Patrick Ocailap said.
By the end of September 2024, USD 760 million in commercial debt facilities had been issued to the government, with Stanbic Bank Uganda holding the largest share. According to the report, a considerable amount of these loans are linked to variable interest rates.
Additionally, a loan of USD 400 million was previously obtained from Standard Chartered Bank to install security surveillance cameras throughout Uganda. In 2021, National Medical Stores received a second USD 2 million loan from the same lender to purchase essential medications.