The government of Uganda has walked out of a USD 2.2 billion contract with China Harbour Engineering Company (CHEC) to build a Standard Gauge Railway (SGR) track in Uganda and has given it to a Turkish firm Yapi Merkezi, reported TRT world.
The referred contract to build a 273 km long railway track from Malaba a town in Kenya to the capital of Uganda, Kampala was issued eight years ago. And it was expected to cost USD 2.2 billion, however, the Export-Import Bank (EXIM) from China refused to fund the project.
The TRT World the national public broadcaster of Turkey further reported quoting SGR Project Coordinator Engineer Perez Wamburu said that they have now signed a Memorandum Of Understanding (MOU) with a Turkish firm for the same contract.
The Kampala authorities say that the financing model for the project will change with Yapi Merkezi, which currently also building Tanzania’s SGR track. It is expected that they will bring in Export Credit Agencies (ECA) to finance the currently halted project, according to the TRT World report.
Wamburu further revealed that Uganda’s Attorney General Kiryowa Kiwanuka had reviewed the project revealing that EXIM China has revoked financing for the CHEC project.
“We read between the lines when China’s Ambassador to Uganda said that after the Covid-19 pandemic, China has become more cautious about financing big infrastructure projects in Africa. We all know that Covid didn’t leave economies of the world the same,” Wamburu told TRT World.
He further said in the TRT World report that EXIM China remained silent on the financing of the project for over a year. After this, the Ugandan government was forced to rethink about bringing in other financiers.
Other than this the same Turkish firm is currently working on the Morogoro- Makutupora Section of the SGR Railway project in Tanzania. The project there is in the second phase of East Africa’s fastest railway line connecting Dar-es-Salaam in Tanzania to Mwanza in Tanzania, known as the Central Corridor. This will connect Uganda, Rawanda, Democratic Republic of Congo to Tanzania. This will act as access to the Indian Ocean, according to the TRT World report.
Last year Kenyan officials said they would ask China to extend the repayment period on USD 5 billion worth of loans, with an incoming cabinet minister telling parliament that the debt is “choking” the country’s economy.
Beijing’s financiers had lent over USD 153 billion to African public-sector borrowers over the past two decades. Only USD 3.4 billion of interest-free debt was cancelled over that period. Earlier, in August 2022, China made an announcement that it would forgive 23 interest-free loans granted to 17 African countries to only show its grip over the east African sovereign debt has become.
China shows the African countries a dream of bringing Beijing’s infrastructure miracle to the continent but in reality, it just increased their expenditure. For example, the railway between Nairobi and Mombasa was financed by Beijing’s USD 5 billion loans.