Govt seeks approval for sh1.3 trillion loan

By Paul Kiwuuwa

THE Government is seeking Parliament’s approval to receive $483m (sh1.39 trillion) from the Exim Bank of China.

The funds are meant for the construction of the 183MW Isimba hydropower station and the Isimba-Bujagali interconnection.

Appearing before the parliamentary committee on national economy last week, finance state minister Fred Omach said: “The Exim Bank of China has agreed to provide 85% of the total cost for the project amounting to $483m with the Government of Uganda contributing 15% that amounts to $85m (sh246b) under the preferential export buyer’s credit financing.” 

Omach said the loan repayment period is 20 years, including a five-year grace period, with an interest rate of 2% per annum.

Isimba Power project is located on River Nile between lakes Victoria and Kyoga, 50km from the source of the River Nile.

Busongora North MP William Nzoghu wondered why the country continues to borrow yet the national debt is increasing. 

Omach said the loan is not expected to increase the indebtedness of the country because it is income-generating and meets the 35% Organisation for Economic Co-operation and Development (OECD) grant element. OECD prevents countries from incurring unsustainable debts.

The committee vice-chairperson, Evelyn Kaabule (Luuka Woman MP), said the request will be tabled before Parliament next week for debate. 

Omach asked the committee to approve the loan request to allow the finance ministry borrow the money from the Exim Bank of China.

“In light of the foregoing, I shall request MPs to note the need for the project,” said Omach.

The state minister for energy, Simon D’ujanga, appearing before the same committee, said the Government decided to contract China International Water and Electricity Corporation (CWE) to implement the project under a bilateral arrangement.

Iddi Isabirye, the Bunya South MP, demanded to know how CWE was awarded the contract.

In response, D’junga said: “It was a condition in the memorandum of understanding signed between Uganda and the Chinese government that China would give its government-owned construction company chance to construct the project.”

D’ujanga said a new substation will be built at Isimba, with a 132 kilovolt (KV) transmission line from Bujagali substation.

“The project will increase the power generation capacity, connecting more households and institutions to the national grid and will reduce poverty levels and improve standards of living,” said D’ujanga.

He added: “The project is expected to generate employment opportunities for the communities around the areas during construction and operation phases.”