Uganda seeks parliament approval to borrow $242 million for two road upgrade projects

Uganda is looking to borrow up to €207.7 million ($242.55 million) from "Citibank and other financial institutions" to help foot the costs of upgrading two roads in the eastern part of the country, the finance ministry said late on Wednesday.

According to a post on X, Finance Minister Henry Musasizi told lawmakers the road was "expected to improve connectivity in the Busoga sub-region and provide an alternative transport link between northern and southern Uganda."

"The project is economically viable with an Economic Internal Rate of Return (EIRR) of 16.7%, above the 11% economic opportunity cost of capital. €179.26 million will cover civil works and insurance, while €28.51 million will finance land acquisition and supervision costs", Minister Musasizi added in the statement.

The borrowing potentially adds to the East African country's growing public debt pile, which the central bank has previously warned was eating up resources needed for spending on crucial social sectors including education and health.

In its latest Article IV Consultation report on Uganda, the IMF said the country's debt-to-GDP ratio will rise to 55.5% in the fiscal year that started in July and projected it will climb to nearly 60% by 2030/31. The country was facing a "high debt service burden," the Fund added.

This month, ratings agency Fitch said Uganda's rating, which was affirmed at "B" with a stable outlook, was constrained by rising public debt and high interest burden.

The finance minister, however, says the project is already included in the debt sustainability analysis and in the fiscal framework for the budget for FY 2026/27 and the medium-term fiscal framework.