The Ugandan government has lost its major airport to China for failing to repay a loan, after the government failed to reverse a loan agreement with the Chinese government which had repayment conditions of attaching its only international airport.
The lenders in China rejected their request to re-negotiate ‘toxic clauses’ in the $200m (Shs713b) loan agreed six years ago to expand Entebbe International Airport.
Entebbe International Airport and other Ugandan assets were attached and agreed to be taken over by Chinese lenders upon arbitration of the loan.
Some of the unfavourable provisions in the loan agreement that Uganda signed with the Export-Import (Exim) Bank of China on March 31, 2015, if not amended, expose Uganda’s sovereign assets to attachments and take-over upon arbitration awards in Beijing.
According reports, President Yoweri Museveni had sent a delegation to Beijing hoping to renegotiate the toxic clauses.
The visit was unsuccessful as China authorities refused to allow any alteration in the original terms of the deal.
The Uganda government, represented by the finance ministry and the Civil Aviation Authority at the time, had on 17 November 2015, signed an agreement with Export-Import Bank of China (Exim Bank) to borrow U$207 million at two per cent upon disbursement; with a maturity period of 20 years including a seven-year grace period.
The deal signed with the Chinese lenders virtually means Uganda “surrendered” its most prominent airport to China.
The Uganda Civil Aviation Authority (UCAA) said some provisions in the Financing Agreement expose Entebbe International Airport and other Ugandan assets to be attached and taken over by Chinese lenders upon arbitration in Beijing.
China has rejected pleas by Uganda to renegotiate the toxic clauses of the 2015 loan, leaving Ugandan President Yoweri Museveni’s administration in limbo.
According to the Daily Monitor of Uganda, the Ugandan government waived international immunity in the agreements it signed to secure the loans, exposing Entebbe International Airport to take over without international protection.
Last week, Uganda’s Finance Minister Matia Kasaija apologised to parliament for the “mishandling of the $207 million loan” from the China Exim Bank to expand Entebbe International Airport.
Progress of works at the airport, built in 1972, has reached 75.2 per cent, with two runways having reached overall completion of 100 per cent.
Entebbe International Airport is Uganda’s only international airport and handles over 1.9 million passengers per year. Its seizure by China would greatly dent the legacy of the 77-year-old Museveni, who came to power on the back of an armed uprising in 1986, and expose him to election defeat.
