Why Uganda Can’t Pull Out Of China’s Loan Deal For Entebbe Airport – MPs

A report by a Parliamentary committee set up to investigate the terms of Uganda’s loan from China’s Export-Import (Exim) Bank for the upgrade of the Entebbe Airport, has revealed it’s almost impossible for the country to pull out of the deal.

According to the committee, the deal is binding of the Ugandan government, as it unearthed the shoddy agreements by Uganda and the bad terms of the deal.

Joel Sseyonyi, Chairperson of the Parliamentary Committee on Commissions, Statutory Authorities, and State Enterprises said the country will face extreme consequences if it pulls out of the deal, making it impossible to take that step now.

He however called for the prosecution of the country’s Minister of Finance, Matia Kasajia and said in other countries, he’d have resigned his position.

“In other countries, Mr Kasaija should have resigned yesterday,” he said.

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According to the East African, a clause in the agreement between both nations binds Uganda to always respect its terms of the deal.

The clause said “the borrower (Uganda) shall keep the documents, terms, conditions of the agreement strictly confidential and must seek permission for disclosure.”

The country’s Attorney General had stated that they could pull out but warned that it may come with consequences, which he didn’t state.

Uganda’s authority over the airport is being threatened by at least ten clauses in the agreement. Local reports said the clauses felt almost like the airport is being mortgaged to the Chinese government.

China is one of Africa’s biggest lenders but have has been criticised for its predatory mechanisms to seeking loan repayments.

In Uganda’s case, the country hasn’t been allowed to fund public services which it uses proceeds from the airport for.

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Prior to the loan, the airport, built in 1951 was generating $68m for the Ugandan government but got a $200m loan from China for upgrade to increase its returns.

A part of the clause obliges the Ugandan government to open an Escrow account in Stanbic Bank where all transactions involving the airport will be checked and approved by China’s Exim bank. The airport’s budgets and account books are also at the mercy of the Exim bank, according to the clauses.

When there’s a dispute, the clause also stated that China International Economic and Trade Arbitration Commission will find a resolution, under relevant Chinese laws.

While there were reassurances over the safety of the airport, as Uganda pays regularly, there is widespread criticism of the decision to get into the deal.

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In 2021, the Uganda Civil Aviation Authority had informed the government of the poor terms of the contract. It said the deal didn’t give the airport financial sovereignty and choked its growth. 

President Yoweri Museveni is batting no eyelid on the issue, as he said Uganda isn’t mortgaging the airport and has enough money to repay its loans.

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