Uganda explores alternative financing paths for ambitious projects amidst global challenges

Uganda explores alternative financing paths for ambitious projects amidst global challenges
An artistic impression of the Jinja-Kampala highway.

As Uganda faces hurdles in obtaining loans from traditional financiers like the World Bank and copes with soaring credit costs due to economic challenges in Russia, Ukraine, and the lingering impact of the Covid pandemic, the government is turning to innovative financing mechanisms for its ambitious projects, particularly in infrastructure.

The closing of 2023 witnessed financial institutions, including the World Bank, maintaining their stance of not approving new loans to Uganda following the passage of the Anti-Homosexuality Bill.

Coupled with the rising cost of credit globally, this has compelled the Ugandan government to seek alternative income sources for its substantial budget, especially with a tax-to-GDP ratio below 14%.

According to Jim Muganga the Executive Director of Public Private Partnerships Unit at the ministry of finance,  "With tightened bolts from financial institutions, the government is exploring alternative financing options, including concessional borrowing and Public-Private Partnerships (PPPs)."

One of the critical sectors grappling with a financing deficit is infrastructure, with a staggering shs14 trillion deficit.

The government aims to address this gap, in part, through PPPs.

These partnerships are viewed as a means to procure services efficiently, leveraging the private sector's expertise and capacity to complement government resources.

"The difference with traditional procurement is the need for instant funding. This urgency is exemplified by stalled projects like the Jinja Expressway," Muganga added.

However, skepticism surrounds the success of PPPs, with concerns about potential white elephants and the dominance of foreign multinational private companies over local players.

Critics question how local companies, often with limited capital, can undertake substantial projects such as the $1.5 billion Kampala-Jinja Expressway.

"PPPs work in consortia, allowing local companies to tap into subcontracts. We anticipate growth in local capacity over time." stated Muganga

The government is eyeing local projects, primarily at the municipal level, to develop the capacity of local companies in PPP arrangements.

These projects include the Jinja Taxi Park, hospitality facility in Lolwe Island (Namayingo), Purongo Cultural Center (Nwoya District), solar park (Oyam and Lira Districts), eco-tourism and apiculture Center (Mukono District), and waste collection and management (Soroti City).

As Uganda navigates the challenging landscape of global financing, the government's shift towards alternative income sources signals a strategic move to ensure the successful implementation of its ambitious projects while fostering the growth of local businesses in the process.

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