MPs Approve UGX 2 Trillion World Bank Loan To Urbanise Kampala City

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The Parliament of Uganda has approved a request by the government to borrow up to $518 million (appx. Shs 1.923 trillion) from the World Bank to finance the Greater Kampala Metropolitan Area Urban Development programme.

This follows the adoption of a report presented to the House by John Bosco Ikojo, the chairperson of the committee on national economy, which scrutinized the requisition during a plenary sitting chaired by deputy speaker, Thomas Tayebwa on Wednesday.

At a plenary sitting held on May 24, 2023, the minister of Finance, Planning, and Economic Development presented a proposal to MPs to borrow up to special drawing rights (SDR) 34.8 million, an equivalent of $48 million from the International Development Association (IDA) of the World Bank Group, and also borrow up to €40 million ($42.66 million) from Agence Francaise De Development (AFD).

With an estimated population of 5.8 million, the Greater Kampala Metropolitan Area comprises Kampala city, and eight Local Government entities namely; Entebbe, Kira, Makindye-Ssebagabo, Mukono and Nansana Municipalities and Mukono, Mpigi, and Wakiso districts.

Based on the anticipated allocations, the maximum amount any one of the entities would receive in total ranges from $4.4 million (Shs 16.244 billion) to $23.38 million (Shs 86.317 billion) per year, based on minimum conditions plus a performance top-up. In the report, Ikojo explained that the borrowing is expected to spur the achievement of Uganda Vision 2040 of upper-middle-income status which depends largely on the transformation of Greater Kampala Metropolitan as a productive, resilient, and liveable city.

The program component includes road rehabilitation and upgrading, drainage channels, markets, and artisan parks as well as institutional strengthening among others. The project will cost an overall $1.179 million (about Shs 4.380 trillion) over five years as detailed in the GKMA Economic Development Strategy (2020-2030).

Cabinet approved the Development Framework 2040 in 2013 which was adopted in 2019 to promote the vital economic contribution and competitiveness of GKMA, and gazetted it as a special planning area worth an investment portfolio of $2,995 million.

KCCA and the eight entities will co-finance $571.31 million (about Shs 2.109 trillion) under their current budget and the World Bank will provide a total funding of $566 million (Shs 2.089 trillion), through a credit of $518 million (Shs 1.912 trillion) and a grant of $48 million (Shs 177.213 billion). The Agence Francaise De Development (AFD), the French Development Agency will provide an additional total funding of $ 42.66 million (about Shs 157.498 billion) through a credit towards the financing of the GKMA Economic Development Strategy.

Currently, the Kampala Metropolitan area is faced with critical infrastructure breakdown especially roads, poor drainage systems that have led to recurrent devastating floods, and lack of widespread reliable transport leading to an unbearable traffic jam that disrupts economic activities. For instance, in Kampala city alone, out of a total road network of 2,100km, only about 300km are paved and in good condition, and the situation is similar in three districts and five municipalities.

According to the committee, Kampala and the eight local government entities will receive the money when delivering the infrastructure investments to be assessed annually by the Office of the Auditor General (OAG) and will focus on three parameters, namely; quality, efficiency, and effectiveness.

The committee noted that the annual average damage to buildings caused by frequent floods is $ 49.6 million (Shs 183.129 billion) affecting more than 170,000 people – and more than 10 per cent of all jobs and main roads in Kampala lie in flood-prone areas.

A 2012 survey by Kampala Capital City Authority (KCCA) found that 24,000 man-hours are lost daily in traffic jams and an estimated loss of about $800 million (about Shs 2.953 billion) per annum. It’s currently estimated that the daily cost of congestion in GKMA is equivalent to $1.5 million (Shs 5.537 billion) – 4.2 per cent of GKMA’s daily GDP amount.

Uganda’s public debt stock

As of December 2022, the total public debt stock stood at $21.74 million (Shs 80.775 billion), increasing from $20.99 million (Shs 78.833 billion) as of the end of June 2022. The external debt constituted 59.2 per cent, an equivalent of Shs 47.760 billion while domestic debt stood at 40.9 per cent (Shs 33.015 billion).

Ikojo concluded that with the growing level of public debt due to its significance in meeting the country’s huge financing development needs, there is a need to pay close attention to the cost of debt and the economic rate of return of projects financed through debt.

This could probably be the last loan disbursement to Uganda after the World Bank Group announced the suspension of new public financing to the country on August 8, 2023, in protest of the Anti-Homosexuality Act passed by parliament in May which it said: “fundamentally contradicts the Group’s values.”

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