China will not take over Uganda's assets because of failure to pay back loans, Finance minister Matia Kasaija has said.
Kasaija says Ugandans shouldn't be at all worried because all the money owed to China shall be serviced thanks to the smart investment decisions being made by government officials. Uganda owes China $1.6bn (about Shs 6 trillion). Kasaija said Uganda's economy is growing at a faster pace, adding that unless there is a catastrophe, nothing will stop Uganda from servicing the Chinese loans.
The debt owed to China arose from infrastructure project financing for the Kampala-Entebbe expressway, Isimba hydro power project and the ongoing expansion of Entebbe international airport.
In his recently released report, the auditor general warned that Uganda was at risk of losing some of its national assets as some unfavourable conditions such as losing sovereignty over national assets had been attached to some loans.
In recent months, there were reports in international media that China wanted to take over Zambia's airport and national power distributor due to the country's failure to service its loans.
Last year, China took over Sri Lanka's port for 99 years due to loan default. Kasaija said takeover of national assets can happen anywhere else but not Uganda.
"China taking over assets? I don’t know. I have heard but in Uganda I have told you as long as some of us are still in charge, unless there is some catastrophe which I don’t really see at all that will make this economy going behind, I want to assure you the economy is now on [track]. And it is possible, am talking about China taking over assets, they can do it elsewhere but here I don’t think they can." said Kasaija.
The minister said government is investing the loan money in critical sectors with quick returns that can in turn be used to pay back debts. These sectors, Kasaija further argued are buttressing Uganda's rising economic growth. The economy grew at 6.1% above the 5.8% projection last year financial.
"The issue really which you should be questioning, when you borrow, do you put the money in projects that will quickly expand the economy so that these benefit expand the economy and increase income," Kasaija argued.
"I have told you precisely that we are doing that only," he said.
Kasaija said Uganda prefers getting bi-lateral loans from China Exim Bank and Japan International Corporation Agency (JICA) because they offer preferential terms with grant element that range between 20% and above 35%.
At the end of June 2018, public debt amounted to $10.7 billion equivalent to Shs 41.3 trillion. This is 41.5 per cent of the country's GDP. External debt accounts for 67.2 per cent ($7.2 billion) and domestic debt Shs 32.8 ($3.5 billion).
The debt levels are below the international sustainability thresholds 50% debt to GDP and significantly below the sub-Saharan average (45.4% debt to GDP). But Uganda is further courting China for a $2.23 billion loan for the Standard Gauge Railway (SGR) project.
In the past months, Kasaija has been saying Uganda submitted all documents to Exim Bank of China and are waiting for a final call from Beijing to ink agreement for SGR loan. If Uganda is given this loan, it will hastily push Uganda's debt past the 50% threshold.
Uganda further plans to fund oil projects such as roads, pipeline and refinery construction through loans in the coming years. But Kasaija insisted that he will not allow debt ratio to surpass 50% of GDP.
"We’re very cautious. If we find that we’re getting near the threshold we’ll hold back. We shall not hesitate to hold back. We shall hold back. We’re not reckless, by the time we take these loans, it takes days and nights - writing to check this and that. So we’re not going to lead your country into debt recklessness…we’re there for you. Don’t worry" he said.
Kasaija was responding to auditor general's report on Uganda's debt sustainability.