Uganda’s big China debt

As of June 2018, Kasaija says, Uganda had signed five agreements with Escrow Account clauses. Together, they hold over Shs150 billion. This is more money that some ministries, including Trade and Industry, Tourism, ICT, and National Guidance got in the 2018/19 nation budget. And Kasaija warns that money deposited on the Chinese escrow accounts is expected to grow as the loans disburse until they are fully paid off.

The current escrow account monies are National Backbone &E-Government Phase III Repayment Current Reserve Current Account US$311,000 (Approx. 1.2 billion), Kampala-Entebbe Airport Expressway Escrow US$7 million (Approx.Shs27 billion), Nsimba Hydropower Project US$9.7 million (Approx. Shs37.6 billion), Aviation Authority US$4 million (Approx. Shs15 billion), and Karuma Hydropower Dam US17.6 million (approximately Shs68.4 billion).

Local content breached

Kasaija is also concerned about China’s insistence that “the good, technologies and services” purchased by using the proceeds of the loan shall be purchased from China preferentially.

“We find this contrary to the cabinet directive on BUBU and Local Content policy,” Kasaija notes.

The Local Content policy is designed to promote participation of Ugandans and Ugandan enterprises on projects, build local capacity, and direct foreign companies to transfer technology to locals. Under the policy, a minimum of 33% of project inputs must be sourced locally from Uganda. Areas covered under the Local Content Policy include earth materials like sand, gravel, and aggregate, cement and steel, and labour, and other locally available inputs.

Kasaija’s warning to Museveni comes when concern is rising over Uganda’s national debt; especially its China component.

National debt from foreign and domestic lenders has grown exponentially in the last five years and there is a fear that if the current trend of borrowing persists, the debt could become difficult to pay.

Strident anti-debt calls have been made by many; from the Auditor General to the IMF/World bank and foreign donor embassies and Civil Society Organisations like the Uganda Debt Network (UDN).

The current Parliament, which is mandated by law to approve all government borrowing, has passed about 10 loans in quick succession in its two years and another five loans are currently under considerations, according UDN; which is a civil society group that monitors national debt performance.

“We approve a new loan every week,” said an MP on a recent radio talk show.

As a result, the public debt has increased by 22% from Shs34 trillion in June 2017, to Shs42.51 trillion by June 30, 2018, according to the 2018 Auditor General’s report released on Jan.04.

Although the furor over growing debt has been simmering for some time, many are now pointing at this latest Auditor General’s report which appears to pour fuel on it.

National assets at risk

At the handover of the report to Rebecca Kadaga; the Speaker of Parliament, the AG John Muwanga warned that Uganda has taken on some significant value loans that have such stringent conditions that they could complicate Uganda’s ability to pay them sustainably.

He said in some cases, Uganda has waived its sovereign immunity and that of properties used as collateral in case matters go to court.

He exposed how Uganda has also agreed to abide by foreign laws in any proceedings to enforce agreements, and agreed to pay all legal fees and insurance premiums on behalf of the creditor in such cases.

At the handover of the report, the Deputy AG, Keto Nyapendi Kayemba, also expressed concern.

“We’re taking in more loans whose conditionalities are probably not very conducive for us as a country,” she said.

Despite such warnings, the government has continued to borrow. The deafness of the government now appears to have made those telling the story of Uganda’s national debt to realise that for it to have the greatest impact, it must have a villain. They have chosen China to be the villain. This appears to be the fuel in the “China to grab Uganda assets” war cry.