Exim Bank again rejects Uganda's loan request to build railway

China’s Exim Bank has once again rejected Uganda’s fresh application for a standard gauge railway loan, indicating a longer wait for Kampala’s dream of realising a modern transit system.

Exim Bank, in a response to Uganda’s application for financing re-submitted in September last year, insists there must be clarification on whether Kenya’s SGR will terminate at the border to guarantee smooth connectivity.

The Chinese responded to Kampala’s request in January this year.

Uganda re-submitted the loan application after changing the scope of works and revising the cost for the 273km project reduced by $26 million to $2.269 billion.

“The China Exim Bank has responded and sought clarification on the connectivity of Uganda SGR and Kenya SGR since Kenya has slowed down on the progress. Discussions are going on at a high level between Kenya and Uganda to agree on new timelines,” project co-ordinator, Mr Perez Wamburu said.

Diplomatic ties
Kenya’s High Commissioner to Uganda, Kiema Kilonzo, said Nairobi remains committed to the project.

“Both Presidents Yoweri Museveni and Uhuru Kenyatta are keen to see the SGR running smoothly from Mombasa to Kampala, the only thing is that this will be achieved in stages. One of the things I did last year was to organise a state visit for President Museveni to Kenya and President Uhuru has also visited Uganda. Discussions are going on at a high level and right now the technical teams are engaging,” Mr Kilonzo added.

President Museveni in June last year, travelled to China accompanied by Kenya’s Cabinet Secretary for Transport James Macharia, in an indication that the two governments are working together to deliver the multi-billion-dollar infrastructure project.

“So there is no doubt about Kenya’s commitment to see that all the sections are done but the priority is now the leg between Naivasha and Kisumu. Kenya is in advanced stages of negotiations [to secure financing],” Mr Kilonzo said in an interview last week.

The Uganda government and the SGR engineering procurement and construction contractor China Harbour Engineering Company last year reviewed the contract signed in March 2015 and slashed the project cost by an initial $120 million.

However, after negotiating the price down, the Uganda government revised the scope of the project works to include a railway spur to Bukasa Port as well as fencing of the whole SGR line from Malaba to Kampala, at a cost of $94 million.

Because of these changes, Uganda needed to resubmit its application to Exim Bank, seeking an 85-15 per cent financing split between the Chinese lender and the government of Uganda.