China Eximbank provides $152.6 million buyer’s credit for Lot 2 of Oil Roads Upgrading Project (Linked to Record ID#59741,#59743)

China Eximbank provides $152.6 million buyer’s credit for Lot 2 of Oil Roads Upgrading Project On March 18, 2020, China Eximbank and the Government of Uganda signed a $152,607,763.75 buyer’s credit loan (BCL) agreement (Contract ID#1420113022020210694) for Lot 2 of the Oil Roads Upgrading Project (also known as the 111 km Hoima-Butiaba-Wanseko Road Upgrading Project).

The BCL is also supported by a Sinosure credit insurance policy. Then, on June 12, 2020.

China Eximbank’s Sovereign Business Department issued a letter to the Government of Uganda’s Ministry of Finance, Planning, and Economic Development, notifying it that ‘all the conditions as set out in Article 16 of the [BCL] agreement have been satisfied’ and the ‘[BCL] agreement becomes effective on and from the date June 12, 2020.’ The borrower was expected to use the BCL proceeds to finance 85% of the cost of a $179,538,545.59 commercial (EPC) contract (No.

UNRA/WORKS/2016-17/00110/02) between the Uganda National Roads Authority (the ‘project owner’) and Chongqing International Construction Corporation, which was signed on January 18, 2018.

The borrower and/or the project owner were responsible for paying 15% of the commercial contract amount ($26,930,781.84) with their own funds.

According to the Government of Uganda’s Aid Management Platform (AMP), the loan achieved a 90% disbursement rate, with China Eximbank making 10 loan disbursements (worth $137,422,989.95) between 2020 and 2022: a $37,877,042.67 disbursement on September 29, 2020, a $17,377,354.10 disbursement on December 14, 2020, a $11,030,412.57 disbursement on March 30, 2021, a $11,056,870.26 disbursement on May 31, 2021, a $9,413,906.40 disbursement on October 12, 2021, a $17,738,745.02 disbursement on February 22, 2022, a $9,642,914.05 disbursement on June 17, 2022, a $11,791,820.26 disbursement on August 18, 2022, a $5,372,385.06 disbursement on December 13, 2022, and a $6,121,539.56 disbursement on December 26, 2022.

According to the Uganda Ministry of Finance, Planning, and Economic Development's Report on Public Debt, Grants, Guarantees and Other Financial Liabilities for Financial Year 2021/2022, as of December 31, 2021, total loan disbursements amounted to $86,755,586 and the loan’s amount outstanding (including arrears) was $86,755,586.

The purpose of the project was to upgrade the 111 km Hoima-Butiaba-Wanseko road from gravel to bituminous standard.

The main objectives of the project were to: (a) improve the road infrastructure within the mineral and oil exploration zones which are in both Hoima and Bulisa districts; (b) improve access to social and economic development opportunities along the route and integration to the rest of the rest of the country by providing high capacity infrastructure; and (c) ensure that no road side communities become worse off as a result of the road upgrading work.

Chongqing International Construction Corporation was the EPC contractor responsible for implementation.

Project implementation commenced on April 16, 2018 and the project was originally expected to reach completion on April 16, 2021. However, the project encountered various implementation delays. As of December 31, 2020, the project had achieved a 71.96% physical progress rate (against a target of 87.88%).

As of November 1, 2021, it had achieved a 90% physical progress rate.

Implementation obstacles included (i) a delay in the signing of the loan agreement, which led to delayed contractor payments between July 2019 and July 2020; (ii) rising water levels in Lake Albert and River Nile, which resulted in flooding of the northern bank and other implementation problems; (iii) the COVID-19 pandemic, which slowed the pace of construction; (iv) inadequate funds and management of land acquisition problems; and (v) poor planning and coordination by the general contractor and subcontractors.

Moreover, on top of implementation challenges, the project has raised environmental concerns due to construction taking place within nationally protected areas and potential critical habitats of Uganda. The project ultimately achieved completion acceptance in August 2022.