Kampala, Uganda: Government has asked Parliament to approve a USD 2 billion (Shs7.6 trillion) loan for the Uganda National Oil Company (UNOC) from Vitol Bahrain E.C., a move that could significantly deepen Uganda’s exposure to debt amid mounting fiscal pressures.
According to a Ministry of Finance brief first reported by local investigative outlet ChimpReports, the borrowing is intended to finance oil-sector infrastructure and national roads, as traditional sources of infrastructure funding dry up.
Of the proposed loan, USD 1.2 billion (Shs4.6 trillion) would fund UNOC projects across the petroleum value chain, including fuel storage terminals in Kampala and Jinja, acquisition of Mombasa fuel storage, extension of the Eldoret–Kampala pipeline, early construction works on the Uganda Oil Refinery, and purchase of shares in the Kenya Pipeline Company.
An additional USD 800 million (Shs3.0 trillion) would go toward national roads infrastructure, largely to support oil and gas logistics.
The facility would run for seven years, with a two-year grace period, and repayments would be backed by government capitalisation of UNOC. Petroleum revenues would be channelled through escrow-style accounts, which the government says would act as security in case of default.
The Finance Ministry argues the projects could generate up to USD 5.6 billion (Shs21.3 trillion) in revenues, easing pressure on the Consolidated Fund and accelerating oil-sector returns.
However, economists have repeatedly warned that Uganda’s growing appetite for borrowing risks unsustainable public debt, especially as global financing for fossil fuel projects tightens following the Paris Climate Agreement.
The brief acknowledges that flagship projects such as the East African Crude Oil Pipeline (EACOP) faced financing hurdles due to environmental activism, despite backing from Uganda, Tanzania, TotalEnergies, and CNOOC.
Parliament is now being asked to authorise the borrowing under Article 159 of the Constitution and approve special accounts to manage petroleum revenues and loan repayments.
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