Uganda rail financing shifts to US after China exit

Shift from Chinese Delays to Western Lenders

Uganda awarded the SGR contract to China Harbour Engineering Company (CHEC) in 2015. It required Chinese government financing. Delays mounted. The government cancelled the deal in January 2023.

A new path emerged. Uganda signed a construction contract with Turkish firm Yapi Merkezi in October 2024. The line runs 272km from Kampala to Malaba on the Kenyan border.

Uganda’s Finance Ministry, via Permanent Secretary Ramathan Ggoobi, announced Citibank’s role as lead arranger. The bank will coordinate funding. A Ugandan delegation met Citibank officials during the IMF and World Bank Spring Meetings in Washington.

Meanwhile, Uganda opened talks with the World Bank. The lender considers various financing options. A Ugandan team met Citibank officials, led by Richard Hodder, managing director for export and agency finance. They discussed funding progress.

Boost to East African Trade Connectivity

The SGR will link Uganda to Kenya’s rail network. It reaches Mombasa port on the Indian Ocean. Freight costs will drop. Regional trade will gain strength.

Uganda eyes wider impact. Future extensions target South Sudan, Rwanda, and the Democratic Republic of Congo. This forms a key East and Central Africa corridor.

The planned funding structure is 85% international loans and 15% Ugandan public funds.

However, challenges remain. The full project costs €2.7bn ($3.19bn). Initial works are set to start before the end of May. It carries passengers and cargo.

Investors should watch this closely. Reliable US-led funding signals stability in African infrastructure. Citibank’s involvement cuts risks from past delays. The railway is projected to cut cargo transport costs by half. Regional integration accelerates.

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