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arliament has instructed the Uganda National Roads Authority (UNRA) to renegotiate a contract with Chongqing International Construction Corporation (CICO) for the reconstruction of Masaka-Mutukula Road and rehabilitation of several roads in Masaka District.
The legislators want the China Export & Credit Insurance Corporation (Sinosure) insurance component, worth Shs 38.86 billion, reduced by 40%. This recommendation was made by the Committee on National Economy, chaired by John Bosco Ikojo, during a plenary sitting on Thursday, August 8, 2024.
“This implies that 40 per cent of the project cost will be financed in time to avoid delays in implementation, since debt service is given priority in the available resource envelope. This means the insurance will only be on the 60 per cent which the contractor will borrow,” Ikojo said.
CICO had argued that the Sinosure Insurance fee is a requirement for all equity and debt investments made by Chinese enterprises in projects outside China, ensuring that the contractor can continue works without interruption in case of payment difficulties.
However, Ikojo noted that a meeting between the committee and the finance minister concluded with an assurance that government will prioritize payments to the contractor after the two-year grace period, reducing the need for full insurance coverage.
Hassan Kirumira presented a minority report, stating, “Colleagues, we are paying commitment fees of close to Shs 434 billion on top of this money that we borrow. We have so far paid Shs 5.5 billion in penalties on cancellation of loans that you have borrowed. The minister should convince us on whether they are ready to provide counterpart funding for these roads.”
Goreth Namugga also raised concerns, saying, “Colleagues, we are paying commitment fees of close to Shs 434 billion on top of this money that we borrow. We have so far paid Shs 5.5 billion in penalties on cancellation of loans that you have borrowed. The minister should convince us on whether they are ready to provide counterpart funding for these roads.”
Additionally, Parliament approved a recommendation to revisit the terms for a proposal to borrow up to US$136.95 million from Citibank to finance the design and build of package 4: Lusalira-Kasambya-Nkonge-Lumegere-Ssembabule Road Upgrading Project.
“The committee observed that the loan is non-concessional, its interest rate is high and the unit cost per kilometre is also high. The committee, therefore, recommends that the Ministry of Finance renegotiates this loan request for better terms,” said Robert Migadde, the deputy chairperson of the committee.
Kirumira also presented another minority report, questioning whether the loan request was approved by the President before its presentation to the committee on August 2, 2024, noting that the President approved the request in August 2022.
“The National Planning Authority raised many concerns about the President’s letter as it is not clear. We wonder if it would be prudent to allow Parliament to scrutinise the responses of UNRA and the Ministry, on NPA’s concerns,” Kirumira said.
The Deputy Speaker, Thomas Tayebwa, defended the loan proposal, stating, “The loan under package four is cheaper than all the loans we approved for oil roads. Oil roads are not like these other roads because they carry heavy equipment. They do double layers on them and where we are doing design for 10 years, here they do design for around 20 years.”
“If you say you do not want the road to be done now yet you have finished the other oil roads and you are finalising EACOP [East African Crude Oil Pipeline Project], what is going to happen to the oil storage facilities we are going to put in this site?” Tayebwa added.