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

China Construction Bank agrees in principle to provide EUR 96.2 million loan for Lot 5 of Oil Roads Upgrading Project In February 2020, the Cabinet of the Government of Uganda agreed in principle to borrow EUR 108.5 million ($119.1 million) from the Industrial and Commercial Bank of China (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 (CCB) for the Development of Oil Roads – Lot 5 Project.

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.

Then, 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.

In the Government of Uganda's Integrated Transport Annual Report from November 2023, the Government of Uganda was identified as the project's sole funder.

However, a 'Report on Public Debt, Grants, Guarantees and Other Financial Liabilities for Financial Year 2023/2024' published by the Government of Uganda's Ministry of Finance, Planning and Economic Development subsequently identified a $112,388,290 China Eximbank loan for Lot 5 of the Oil Roads Upgrading Project.

It also noted that the China Eximbank had achieved a 85.9% disbursement rate ($96,563,881 out of $112,388,290) as of June 30, 2023.

The purpose of the project is to design and construct 97 km of ‘oil roads’, including a 47 km road between Masindi and Biso, a 25 km road between Kabaale and Kiziranfumbi, and a 25 km road from Hohwa to Butoole that runs through Nyairongo and Kyarushesha (Kyarusesa).

More specifically, the project 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 general contractor responsible for project implementation.

Construction commenced in April 2019.

The project had achieved a 61.9% completion rate as of April 2022, an 82.6% completion rate as of June 2023, and an 84.3% completion rate as of March 2024. The project was originally scheduled to reach completion on July 10, 2023.

However, due to unforeseen delays and challenges (including cash flow constraints due to delayed invoices payments, inclement weather, delayed acquisition of right of way along Kabaale-Kiziranfunmbi, and poor planning by local contractors), the scheduled project completion date was eventually pushed back to December 29, 2023.