Parliament Approves UGX 4 trillion Loan for Karuma Dam Project

2134 Views Kampala, Uganda

In short
Parliament has approved a government request to borrow UGX 4.3 trillion Shillings ($1.4billion) from a Chinese Bank for the construction of the 600-megawatts Karuma Hydro Power Dam amid concerns by legislators that excessive borrowing could soar up the country's foreign debt and affect economic growth.

Parliament has approved a government request to borrow 4.3 trillion Shillings ($1.4billion) from a Chinese bank for the construction of the 600-megawatts Karuma Hydro Power Dam amid concerns by legislators that excessive borrowing could soar up the country's foreign debt and affect economic growth.
 
Though construction of the dam was launched in 2013 - with works beginning the following year- funding for the project has been mired in controversy with Sino hydro-the Chinese firm that won the contract-yet to secure money from Exim bank.
 
Under the terms of the funding, Sino hydro had agreed to cater for 85 per cent of the project with a soft loan from Exim bank whereas the Ugandan government would cater for the 15 per cent.
 
With Uganda's total power output currently at 850 megawatts-way below demand-Karuma will add another 600 megawatts to the grid upon completion-effectively scaling down power tariffs.
Domestic consumers currently pay 531 Shillings per unit while commercial consumers pay 485 Shillings and  602 shillings for peak hours.
 
The Chairman of the Committee on National Economy and Ibanda North Member of Parliament Xavier Kyooma tabled a report supporting the loan request on grounds that the dam will increase power generation, satisfy the demand and lower the costs.
 
Lwemiyaga County Member of Parliament Theodore Ssekikubo and Tororo County Member of Parliament Geoffrey Ekanya raised reservations about the loan warning that with Uganda's debt spiraling to over 20 trillion shillings, the government needs to be cautious with borrowing.
 
"We need the power as we needed it yesterday but we do not have the money and we need to be very careful. Our standing debt which government has not declared is more than 7 trillion shillings - that is domestic alone. That comes about 20 trillion shillings. Our growth in terms of Gross Domestic Product is not more than 5 trillion shillings. This loan has a period of twenty years. This is the highest borrowing ever in the history of this country," Ekanya said.
 
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But Dokolo MP Felix Ogong countered that with construction of Karuma dam, electricity tariffs will be reduced, economic growth increased-revenue base increased and the country will have the purse to clear the loan bills.
 
"With the construction of Karuma dam, we are going to offload 600mega watts. When it is done - it is going to reduce the tariff. It is going to spur development. It's going to reduce the cost of production we cannot wait any longer,"Ogong said.
 
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Uganda's debt currently stands at 20 trillion Shillings ($7 billion).The approval for the Karuma project was the second this month following the authorisation of a UGX 1.4 trillion shillings for the construction of Isimba hydropower project.