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Gov’t Presents Fresh UGX 1.4 Trillion Loan Request for Malaba Railway Project

The new loan request is in the excess of 101.05 billion of government’s initial need. The Kampala-Malaba railway connects Uganda’s capital with Kenya at the Malaba border.
State Minister for Finance and Planning David Bahati

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The Government has backtracked on its earlier request to Parliament to borrow 1.29 trillion Shillings for the refurbishment of the Kampala-Malaba Meter Gauge Railway Project and presented a fresh loan request of 1.393 trillion Shillings.

The new loan request is in the excess of 101.05 Billion Shillings of the government’s initial request.

The Kampala-Malaba railway connects Uganda’s capital with Kenya at the Malaba border.

David Bahati, the State Minister of Finance for Planning Wednesday moved the motion to withdraw the government’s earlier request.

The money for the project will be sourced from the African Development Fund- ADF which will provide 356.61 billion shillings, the African Development Bank- ADB (825.52 billion) and the Corporate Internationalization Fund of Spain (110.72 billion shillings).

Speaker Rebecca Kadaga tasked the Committee on National Economy to scrutinize the request and report back to the House.

However, Bahati asked permission to withdraw the request and presented a fresh one with more funds required to finance the project. 

He said that during the consideration of the initial loan request, the bank informed the ministry that it can provide more money in a concessional window than a non-concessional window.

Concessional loans also referred to as soft loans have more generous terms than non-concessional loans. They generally have a low-interest rate and have long grace periods.

“I note that the changes in the loan amount amounts and terms require a formal withdraw of the loan request and submission of a new loan request to parliament. So, Madam Speaker, I am withdrawing this but formally laying the new terms so that the Committee of National Economy can conclude this request by the government,” Bahati said.

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Geoffrey Macho, the Busia Municipality MP raised concern saying that the government is moving to refurbish the old railways yet others are moving towards Standard Gauge Railway.

“What is wrong with Uganda, who has cursed us?” he asked.

Kadaga told the government to withdraw the initial loan which MPs approved and sent the new loan request to the National Economy Committee for consideration.

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The country’s national debt recently hit 65.82 trillion shillings as of December 2020, a figure way above the 49 trillion debt reported in 2019. 

The new loan requests by the government imply that Uganda’s debt portfolio will swell in the coming financial year 2021/2022 and that the country is moving closer to its threshold set by the International Monetary Fund at 50 percent debt-to-GDP ratio for developing countries.

The country’s nominal debt to Gross Domestic Product -GDP as of December 2020 stood at 47.2 percent and the public debt is projected to rise to 51.9 percent of the GDP in the coming financial year 2021/2022.

In his recent interface with Parliament’s Budget Committee, Finance Minister Matia Kasaija said that the debt burden had increased because the government borrowed to finance infrastructural projects such as transport, oil and gas sectors and to also counter the shock to the economy occasioned by the Covid-19 pandemic.  

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