Given the need to expand the transport sector along with regional infrastructure development, Uganda has launched an aggressive and ambitious 20-year civil aviation master plan that includes the modernization of its only international airport in Entebbe on the shores of Lake Victoria, 43 km south of capital Kampala.
The renovated airport would handle around 150,000 operations per year as the inland area considered turning its main gateway into a regional hub.
On March 24, 2015 Treasury Secretary Matia Kasaija said, asking parliament to approve a $ 325 million ($ 1.1 trillion) loan from Exim Bank of China for the airport upgrade. The money was approved and work began in January of the following year. In an address to MPs, Mr Kasaija said that this was the best offer available and that they had to take it very quickly.
The upgrade would include modifying and modernizing the main terminal building to accommodate the expected increase in traffic to tackle a new freight center and multi-storey park.
However, as construction continued, the Uganda Civil Aviation Authority (UCAA) manager felt uncomfortable with some clauses of the loan agreement has red flags hoisted.
Around 13 clauses were considered unfriendly and as good as a mortgage for the airport and an erosion of the sovereignty of the country. Most worrying for aviation bosses was a clause that gave Exim Bank sole authority to authorize withdrawals of funds from UCAA accounts.
The bank also had the authority to approve annual and monthly operating budgets, which she could refuse, and the right to consult the government and UCCA books of accounts. The China International Economic and Trade Arbitration Commission (CIETAC) in Beijing also had a mandate to resolve disputes.
The first alarm sounded was former UCAA managing director David Kakuba, who warned that the clauses would not be changed could suspend state assets from seizure and takeover by China.
A team led by the former Chinese envoy Dr. Crispus Kiyonga in 2019 was informed directly that there would be no change to the loan agreement.
Planning Minister Amos Lugoloobi admitted that the loan was poorly negotiated and signed that However, the ministry has taken tough measures, including the establishment of an entire department to ensure that loans are closely monitored so the country does not fall into debt difficulties.
“We have limited borrowing to critical projects and are providing it sure our credit ratio won’t exceed 50 percent of GDP, ”he said. Uganda’s current debt to GDP ratio is around 45.7 percent.
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Mr Lugoloobi ruled out any kickbacks during the negotiations, although President Yoweri Museveni had previously scourged technocrats who demanded bribes, increased project costs and influenced the negotiations.
‘No cause for concern’
Attorney General Kiwanuka Kiryowa, downplaying fears of the airport takeover, says there is no cause for concern as no Ugandan property is mortgaged. He added that the loan is a commercial contract with an obligation on both parties.
“When you borrow money, your obligation to pay is there. If you don’t pay, the other party can take you to court. In this case it would be CIETAC, “he said.
” Let everyone do their part. The airport is making money and will meet its obligations. ”
The agreement is not unusual and does not need to be changed.
Finance Minister Kasaija said the government would intervene in the event of a loan default. “In the unlikely event that the UCAA did not generate sufficient income to service the loan, the central government will intervene,” he said.