China Construction Bank agrees in principle to provide EUR 96.2 million loan for Lot 5 of the Oil Roads Upgrading Project (Linked to Project ID#59741, #59742, #59743)

In February 2020, the Cabinet of the Government of Uganda agreed in principle to borrow EUR 108.5 million ($119.1 million) from ICBC for Lot 5 of the Oil Roads Upgrading Project. The proceeds of the loan were to be used by the borrower to partially finance a commercial contract between UNRA and China Railway Seventh Group, which was signed in March 2019. However, ICBC subsequently withdrew its support for the project. Then, in September 2021, Uganda’s Ministry of Finance asked Parliament for authorization to borrow EUR 96,270,833.84 ($108,608,903.90) from China Construction Bank for the Development of Oil Roads – Lot 5 Project. The CCB loan was expected to carry the following borrowing terms: a 15 year maturity, a 3 year grace period, an interest rate of 6-month EURIBOR plus a 2.6% margin, a 2% default interest rate, a 1% management free, and a 0.5% commitment fee. The borrower was also expected to purchase a credit insurance policy from Sinosure. The proceeds of the loan were to be used by the borrower to finance 80% of the cost of the March 2019 commercial contract between UNRA and China Railway Seventh Group. However, in December 2021, Uganda’s Ministry of Finance withdrew its request for parliamentary authorization to borrow from China Construction Bank for the project. It said that it would finance the project without contracting a loan. The purpose of the project is to design and construct a 97 km ‘oil road’ connecting Masindi-Biso, Kabaale-Kiziranfumbi and Hohwa-Nyairongo-Kyarushesha-Butoole. More specifically, it involves widening of the roads, light grading and opening up of drainage structures, offshoots, drainage drifts, filling potholes, rock blasting, crushing of base course and concrete aggregate, excavation, and clearing of topsoil. China Railway Seventh Group is the contractor responsible for project implementation. Construction commenced in April 2019. The project had achieved a 61.9% completion rate as of April 2022.

Additional details

1. The Government of Uganda Aid Management Platform system identification number is 872992414981. 2. The draft China Construction Bank loan agreement can be accessed in its entirety via https://www.dropbox.com/s/0pcmy221j8gr2w1/EUR%2096%2C270%2C833.84%20loan%20agreement%20with%20China%20Construction%20Bank%20to%20finance%20the%20Masindi-Biiso%2C%20Kibaale-Kiziranfumbi%20and%20Hohwa-Nyairongo-Kyarusesa-Butoole%20Road%20Upgrading%20Project.pdf?dl=0. 3. The Government of Uganda (GoU) Project Code is UG-1176. 4. This project is also known as the Development of Oil Roads – Lot 5 Project. 5. China Eximbank financed Lot 1, Lot 2, and Lot 3 of the Oil Roads Upgrading Project (as captured via Project ID#59741, #59742, #59743).

Number of official sources

8

Number of total sources

13