News
Islamic Development Bank approves sh2.72 trillion for Uganda SGR project
"Given the changes in the global financial architecture, there is a need for multilateral development finance institutions such as the IsDB to reform and become more inclusive, adaptive, and responsive to the needs of their member countries," Dr. Ggoobi said.
According to a statement from the Ministry of Finance, Dr. Ggoobi welcomed the approval and reaffirmed the government's commitment to securing full financial closure for the railway project by November 2026.
By: John Masaba, Journalist @New Vision
KAMPALA - Uganda has secured a major boost for its Standard Gauge Railway (SGR) project after the Islamic Development Bank (IsDB) approved a €650.75 million (about Shs2.72 trillion) financing package for the Malaba-Kampala rail line.
The approval, granted by the IsDB Executive Board during the bank's 51st Annual Meetings in Baku, marks the largest single-project financing package ever authorised by the institution for Uganda.
The funding will support the construction of key infrastructure along the Malaba-Kampala corridor, including the 553-metre Jinja Nile Bridge and the 2.12-kilometre Mbuya-Kampala tunnel.
It will also finance six railway stations in Tororo, Iganga, Jinja, Lugazi, Kampala East, and Kampala City, as well as locomotive workshops in Kampala East, Jinja, and Tororo.
Uganda's delegation to the Annual Meetings, held from June 16 to 19, was led by the Permanent Secretary and Secretary to the Treasury, Dr. Ramathan Ggoobi, who represented the country as Temporary Governor.
According to a statement from the Ministry of Finance, Dr. Ggoobi welcomed the approval and reaffirmed the government's commitment to securing full financial closure for the railway project by November 2026.
The SGR is expected to transform cargo transportation by shifting freight from road to rail, significantly reducing logistics costs and strengthening regional trade links.
This latest financing expands the IsDB's investment portfolio in Uganda.
As of May 2026, the bank had eight active public-sector operations in the country, comprising loans and grants worth approximately $896.55 million.
A substantial portion of this portfolio is anchored by the $721 million Integrated Transport Infrastructure Services Programme.
Beyond transport infrastructure, the IsDB is supporting projects across education, health, agriculture, and road development.
The bank is financing Technical and Vocational Education and Training (TVET) programmes, the construction of regional oncology centres in Arua and Mbale, and irrigation schemes in Unyama, Namalu, and Sippi.
The SGR is expected to transform cargo transportation by shifting freight from road to rail, significantly reducing logistics costs and strengthening regional trade links.
This latest financing expands the IsDB's investment portfolio in Uganda.
As of May 2026, the bank had eight active public-sector operations in the country, comprising loans and grants worth approximately $896.55 million.
A substantial portion of this portfolio is anchored by the $721 million Integrated Transport Infrastructure Services Programme.
Beyond transport infrastructure, the IsDB is supporting projects across education, health, agriculture, and road development.
The bank is financing Technical and Vocational Education and Training (TVET) programmes, the construction of regional oncology centres in Arua and Mbale, and irrigation schemes in Unyama, Namalu, and Sippi.
It is also funding road upgrades along the Muyembe–Nakapiripirit, Rwenkunye–Apac–Lira–Acholibur, and Kumi–Ngora–Serere–Kagwara routes, in addition to the Masindi Port Bridge and town access roads in Kaberamaido and Kalaki.
During the Governors' Roundtable, Dr. Ggoobi commended the launch of the IsDB Concessional Fund (ICF), an initiative aiming to increase concessional financing to roughly 15% of the bank's annual approvals.
He noted that the new financing mechanism arrives at a critical time, as many developing countries face shrinking and increasingly unpredictable aid flows.
"Given the changes in the global financial architecture, there is a need for multilateral development finance institutions such as the IsDB to reform and become more inclusive, adaptive, and responsive to the needs of their member countries," Dr. Ggoobi said.
Project hurdles and contractor changes
While the financing approval is a major milestone, the project currently faces significant hurdles. According to a recent report, the SGR is only at 25 percent implementation. Land acquisition stands at 42.3 percent of the required 3,512 acres, and a funding gap of Shs546.8 billion remains to be addressed.
The project has also seen turbulence regarding its primary contractors.
In October 2024, the government signed a contract with Turkish construction firm Yapi Merkezi to build the first phase of the 1,700km SGR network at a cost of €2.7 billion (about Sh10.8 trillion).
The 48-month project was slated for completion by 2028, but its execution stalled.
Uganda had initially entered into an agreement in 2015 with China Harbour Engineering Company (CHEC) to implement the project, conditional on the firm securing funding from the Chinese government.
Following years of stalled negotiations, the government terminated that agreement and pivoted to Yapi Merkezi.
The uncertainty surrounding the Turkish firm culminated on Tuesday when the Chief of Defence Forces, Gen. Muhoozi Kainerugaba, publicly announced the cancellation of the contract.
"We have cancelled the contract with the Turkish company to build the SGR. We will get another one that is more worthy of our country!" Gen. Muhoozi posted on social media.
Economic justification
Once completed, the SGR is expected to make Uganda one of the most competitive economies in the region, spurring national development.
According to the Ministry of Finance, the railway will facilitate the movement of goods and people at a significantly lower cost.
To illustrate the high cost of local logistics, the Ministry notes that shipping a cargo container from Istanbul, Turkey, to Mombasa, Kenya—a distance of 30,963km—costs about $1,800 (Sh6.5 million).
In contrast, transporting that same container from Mombasa to Kampala, a mere 1,100km inland, costs a trader up to $4,000 (Sh14.6 million), highlighting the expensive nature of Uganda’s current surface transport and the urgent need for the SGR.
During the Governors' Roundtable, Dr. Ggoobi commended the launch of the IsDB Concessional Fund (ICF), an initiative aiming to increase concessional financing to roughly 15% of the bank's annual approvals.
He noted that the new financing mechanism arrives at a critical time, as many developing countries face shrinking and increasingly unpredictable aid flows.
"Given the changes in the global financial architecture, there is a need for multilateral development finance institutions such as the IsDB to reform and become more inclusive, adaptive, and responsive to the needs of their member countries," Dr. Ggoobi said.
Project hurdles and contractor changes
While the financing approval is a major milestone, the project currently faces significant hurdles. According to a recent report, the SGR is only at 25 percent implementation. Land acquisition stands at 42.3 percent of the required 3,512 acres, and a funding gap of Shs546.8 billion remains to be addressed.
The project has also seen turbulence regarding its primary contractors.
In October 2024, the government signed a contract with Turkish construction firm Yapi Merkezi to build the first phase of the 1,700km SGR network at a cost of €2.7 billion (about Sh10.8 trillion).
The 48-month project was slated for completion by 2028, but its execution stalled.
Uganda had initially entered into an agreement in 2015 with China Harbour Engineering Company (CHEC) to implement the project, conditional on the firm securing funding from the Chinese government.
Following years of stalled negotiations, the government terminated that agreement and pivoted to Yapi Merkezi.
The uncertainty surrounding the Turkish firm culminated on Tuesday when the Chief of Defence Forces, Gen. Muhoozi Kainerugaba, publicly announced the cancellation of the contract.
"We have cancelled the contract with the Turkish company to build the SGR. We will get another one that is more worthy of our country!" Gen. Muhoozi posted on social media.
Economic justification
Once completed, the SGR is expected to make Uganda one of the most competitive economies in the region, spurring national development.
According to the Ministry of Finance, the railway will facilitate the movement of goods and people at a significantly lower cost.
To illustrate the high cost of local logistics, the Ministry notes that shipping a cargo container from Istanbul, Turkey, to Mombasa, Kenya—a distance of 30,963km—costs about $1,800 (Sh6.5 million).
In contrast, transporting that same container from Mombasa to Kampala, a mere 1,100km inland, costs a trader up to $4,000 (Sh14.6 million), highlighting the expensive nature of Uganda’s current surface transport and the urgent need for the SGR.