Deputy Speaker Thomas Tayebwa has defended the government’s decision to borrow Euros 126.44 million (UGX 534.91 billion) from CitiBank for the construction of the 97-kilometer Lusalira-Lumegere-Ssembabule Road, urging Ugandans to abandon the notion of cheap loans.
Tayebwa emphasized that credit has become expensive globally, citing his own difficulties in securing affordable loans for personal business ventures. “We need to update ourselves; there is no cheap money in the world right now. If you are waiting for concessional loans, forget about it. We can no longer get cheap money globally, even for business. So, we either stop borrowing completely or accept these terms to proceed with essential projects,” Tayebwa stated during a heated plenary session.
Tayebwa’s defense came despite warnings from the Committee of National Economy and Parliament’s Budget Office. Experts cautioned that the loan terms would burden taxpayers with additional costs, pushing the total project cost to an estimated UGX 627.309 billion. Committee Vice Chairperson Robert Migadde (Buvuma County) opposed the loan, urging Parliament to reject the proposal and push the Ministry of Finance to renegotiate.
Migadde argued that the non-concessional nature of the loan contradicts Uganda’s NDP II financing framework and would lead to exorbitant costs, including a 5.0% interest rate, 1.4% upfront fees, and a 1.7% commitment fee.“The project’s financing terms are unsustainable, and the unit cost per kilometer, at UGX 5.2 billion excluding land acquisition, is excessive. The highly commercial nature of this loan, combined with its high costs, will severely diminish the return on investment,” warned Migadde.
The Ministry of Finance defended the loan, citing delays associated with multilateral lenders offering concessional loans and the tight fiscal space in Uganda’s infrastructure investment. However, the Committee maintained that despite the road’s importance for oil production, the project’s high cost necessitates re-evaluation.
Land acquisition challenges further complicate the project, with the Uganda National Roads Authority (UNRA) revealing that only 62% of the necessary land had been secured by December 2023. A significant portion of the road must pass through Kabamba Barracks, but the Ministry of Defence has yet to sign off on the required land.
Opposition MPs, including Hassan Kirumira (Katikamu South) and Nicholas Kamara (Kabale Municipality), also urged the government to seek alternative funding. They exposed additional unfavorable loan terms, such as a 12% interest rate, commitment fees, and the requirement for payments in Euros.“This loan is significantly more expensive than concessional loans. It would be prudent for the government to renegotiate or seek alternative funding sources,” Kirumira argued.
Despite these concerns, the Deputy Speaker put the government’s motion to a vote, resulting in a majority of MPs supporting the borrowing, effectively ending attempts to halt the loan.
Source: Parliament Watch