The government has signed a 10-year loan agreement worth EUR 270 million (about Shs 1.1 trillion) with the African Export-Import Bank (Afrexim Bank) to finance development and infrastructure projects under the 2024/25 national budget.
In a statement, the Minister of Development Finance, Planning and Economic Development, Matia Kasaija, said the facility will be directed toward investments that strengthen infrastructure and human capital development.
“The facility is targeted towards financing of investments in infrastructure and human capital development in the budget, to support sustainable growth and social economic transformation,” Kasaija said.
He explained that the funds will support several government initiatives, including value addition to agriculture, the oil and gas sector, energy generation and distribution, special export processing zones and industrial parks, as well as the construction and maintenance of road, rail and port infrastructure.
Kasaija described the financing as proof of the strength of African financial institutions in responding to the continent’s development needs.
“This financing is an indication of the capacity of an African development financial institution like Afrexim Bank among others, to support African strategies and development objectives,” he said.
“This is a clear demonstration of the Bank’s relevance to Uganda and the African continent, as well as an expression of its confidence in delivering solutions tailored to the requirements of its member countries,” he noted.
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The minister further revealed that Afrexim Bank has chosen Uganda to host its East African regional office, which is under construction along Yusuf Lule Road in Kampala.
The office will house the Afrexim Bank Africa Trade Centre (AATC) to coordinate the bank’s business in the region and expand trade-related financing activities in Uganda.
“These investments signify the Afrexim Bank’s strong confidence in the Government of Uganda and our shared vision of promoting trade and development in Africa,” Kasaija said.
However, Uganda’s growing debt burden raises concerns about the long-term impact of such borrowing.
As of June 2024, the country’s public debt stood at $25.55 billion, up from $23.6 billion six months earlier. Nearly $11 billion of this is domestic debt.
Government has borrowed over Shs 6 trillion from both international and local markets in recent months.
While Kasaija insists “there is no cause for alarm” since Uganda’s debt-to-GDP ratio is at 46.86 percent, slightly lower than last year’s 47.4 percent, rising yields, soaring borrowing costs, and fragile investor confidence suggest the fiscal outlook remains uncertain.
