Uganda says seeking $500 million loan from China for roads in oil area

KAMPALA (Capital Markets in Africa) – Uganda says it has asked China for a $500 million loan to help build almost 600 km (360 miles) of roads in the country’s oil-rich west, amid criticism over heavy borrowing that has ballooned the country’s debt.

Uganda has discovered an estimated 6.5 billion barrels of crude reserves on its Albertine rift basin along the border with the Democratic Republic of Congo.

However, lack of infrastructure, such as roads and an export pipeline, as well as disagreements between the government and international oil companies over taxes, have repeatedly delayed production.

The Uganda National Roads Authority needs the money to build 580 kilometres of roads around the area, said Mark Ssali, head of public and corporate affairs at the state-run UNRA.

“There have been some contacts with Exim Bank (of China) for the loan,” he told Reuters in an interview on Wednesday. “But we are currently procuring a Chinese contractor, which is a precondition for any concrete talks with Exim.”

Uganda wants to start oil production in 2020, when a pipeline through neighbouring Tanzania is set for completion.

China has extended large lines of credit to Uganda in recent years, mostly for infrastructure, including power plants, roads and an airport refurbishment. Officials have also said they are seeking $2.3 billion to build a standard gauge railway.

Government critics and the opposition say the appetite for Chinese credit risks dragging the country back into the deep indebtedness of the mid-2000s.

“Given the accelerated borrowing and misuse of loans, we’re likely to go back into debt distress,” said Julius Kapwepwe, director of programs at Uganda Debt Network, a think tank that tracks Uganda’s public debt. “We might start begging for debt forgiveness again.”

According to Central Bank of Uganda data, the country’s total external debt stood at $10.3 billion in May last year, compared with $3.8 billion in the financial year ended June 2013.

Source: Reuters Africa News