China Exim bank pledged to loan to Uganda for the construction of a 273km standard gauge railway (SGR ) (Linked to Record ID#59748)

Project narrative

In August 2017, Uganda started negotiating a USD2.9bn (Ush10.3 trillion) loan with the Export-Import Bank of China for the construction of a 273km standard gauge railway (SGR) connecting the capital Kampala to Kenya through the border town of Malaba. The construction would be carried out by the China Harbor Engineering Company. On September 13, 2017, China Exim Bank's officials started the project appraisal. Originally, the Ugandan authorities believed the loan agreement would be finalized by the end of the year. However, no loan agreement was signed. The Chinese side stated their concerns on Uganda's ability to pay back the loan after its neighboring country, Kenya, struggled to pay back. The Uganda Standard Gauge Railway is a planned railway system linking the country to the neighboring countries of Kenya, Rwanda, Democratic Republic of the Congo and South Sudan, as part of East African Railway Master Plan. The new Standard Gauge Railway (SGR), is intended to replace the old, inefficient metre-gauge railway system. In order to be commercially viable, all countries must build and connect its part of rails to others. However, China Exim Bank rejected Kenya's request to build Naivasha in the Rift Valley all the way to Malaba on the border with Uganda, hence preventing Kenya's rail from connecting with Uganda's. Because of the potential inability to connect the countries smoothly, China is hesitant to fund Uganda and Uganda is hesitant to build it. In September 2019, Uganda resubmitted the loan proposal to China Exim Bank after changing the scope of works and revising the cost for the 273km project reduced by $26 million to $2.269 billion. In January 2020, China Exim Bank rejected the proposal and insisted there must be clarification on whether Kenya’s SGR will terminate at the border to guarantee smooth connectivity. On March 30, 2020, according to SG Railway Uganda's twitter account, the questions had been answered in a meeting between Ugandan and Chinese authorities. There were speculations that the Ugandan government would give up on the development. However, speaking in an interview in November 2020, Mr Stanley Ssendegeya, the new URC (Uganda Railways Corporation) managing director, told Daily Monitor that government was negotiating with Exim Bank of China for financing, noting that the money might be available in a year or less. In April 2021, Uganda declined to repay the loan with oil revenue, and drafted up a new proposal to the China Exim Bank. In May 2021, Uganda resubmitted a loan proposal to China Exim Bank. In September 2021, the project coordinator Mr Wamburu told Daily Monitor, a Ugandan newspaper, that earlier in May, government had submitted documents to the Chinese Exim Bank on the three sticky issues, among which include Kenya’s commitment to the remaining two sections of the railway that connect to the Uganda border at Malaba, loan repayment plan and post construction operations. According to him, the negotiations are at advanced stages. After eight years of unsuccessful negotiations, Uganda formally cancelled its agreement with China Harbour Engineering Company (CHEC) due to a lack of progress and communication. No financing was provided by China Eximbank. In 2023, Uganda signed a Memorandum of Understanding with the Turkish company Yapi Merkezi to take over construction of the SGR. This shift ends Uganda’s pursuit of Chinese funding for the project and effectively cancels the China-backed initiative.