Uganda, South Korea sign $500m infrastructure loan deal: summary
What we know
- Uganda's Finance Ministry announced on Thursday, June 6 that the country has entered into a $500 million loan agreement with South Korea to support infrastructure development projects within Uganda in an X post.
- The agreement was signed by Uganda's Finance Minister, Matia Kasaija, and South Korea's Minister of Foreign Affairs, Cho Tae-Yul. The loan will be provided by South Korea's Export-Import Bank.
- Although the announcement lacked specific details on the infrastructure projects to be funded, the loan will likely be utilised for financing road and energy initiatives, as these sectors have historically been the primary focus of Uganda's borrowing efforts.
- Uganda's already-strained finances are likely to be further intensified by the new loan, adding to the country's growing debt crisis. This crisis led Moody's to downgrade Uganda's credit rating in May 2024, citing concerns over the country's ability to repay debts.
- As of December 31, Uganda's public debt stood at $24.6 billion, with a significant portion attributed to infrastructure spending. However, the country's finance ministry in January 2024 added that during the fiscal year 2021/22, the external debt stood at USD 12.82 billion and saw an increase to USD 14.24 billion in the subsequent fiscal year 2022/23. Similarly, the domestic debt, when evaluated in US Dollars, rose from USD 8.16 billion to USD 9.43 billion within the same timeframe.
What they said
Commenting on the development, Uganda's Ministry of Finance wrote "We welcome the Framework Agreement for USD 500 million loan from the Korea EXIM Bank for the period (2024-2028) to finance infrastructure projects in Uganda. The framework agreement under the Korea Economic Development Cooperation Fund (EDCF) was signed between Finance Minister @MatiaK5 and the Korean Minister of Foreign Affairs Cho Tae-Yul in Seoul on the sidelines of the first Korea-Africa Summit" on X.
