Uganda has been forced to borrow again from commercial banks as alternatives dim. Debt owed to commercial banks is reaching $2 billion as Kampala deals with pressure to finance energy and transport-related projects.

By this week, Uganda was pursuing a $190 million loan from a group of local banks to settle Umeme Ltd’s exit claims arising from a 20-year power distribution concession that expires this month.

Stanbic Bank Uganda Ltd is the lead arranger but details surrounding other participating banks and applicable interest rate are still scant. Parliament approved the loan request last week.

Another $50 million is required for the recapitalisation of the Uganda Electricity Distribution Company Ltd, Umeme Ltd’s successor and is to be raised from commercial lenders, according to government insiders, as is the more than $1 billion needed to finance the standard gauge railway project.

Commercial banks hold a 12 percent share ($1.73 billion) of Uganda’s external debt, according to the country’s debt sustainability analysis report of September 2024.

In comparison, bilateral creditors, including China, held 23 percent ($3.41 billion) while the bulk (65 percent or $9.77 billion) was held by multilateral creditors, including the World Bank and International Monetary Fund.“The message we are sending to investors is that more commercial borrowing is required to execute certain projects and spending commitments.“The new commercial loans will raise our debt to GDP ratio to 46.8 percent in the short term,” explained Patrick Ocailap, Deputy Secretary to the Treasury.

Read: How Uganda’s appetite for home loans starved commercial lenders of moneyUganda’s overall external debt stock increased from $14.59 billion in June 2024 to $14.91 billion by the end of September 2024.

Stanbic Bank Uganda accounts for the largest share of commercial debt facilities issued to the government amounting to $760 million by the end of September 2024. A significant portion of these loans is pegged to floating interest rates, the report indicated.

A $400 million loan was also previously secured from Standard Chartered Bank for installation of security surveillance cameras across Uganda. Another $2 million loan had been extended by the same lender to National Medical Stores in 2021 for procurement of vital medicines.

Total external debt servicing costs increased from $240.5 million recorded between April and June 2024 to $363.8 million between July and September 2024, a trend partly attributed to debt repayment obligations tied to the Karuma and Isimba hydropower projects.

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