Top Ugandan officials have been boxed into a corner of bother after lenders in China rejected their request to re-negotiate 'toxic clauses' in the $200m loan picked taken years ago to expand Entebbe International Airport.
Some of the unfavourable provisions in the loan agreement that Uganda signed with the Export-Import Bank (Exim) of China on March 31, 2015, if not amended, expose Uganda's sovereign assets to attachments and take-over upon arbitration awards in Beijing.
Any proceedings against Uganda Civil Aviation Authority (UCAA) assets by the lender would not be protected by sovereign immunity since Uganda government, in the 2015 deal, waived the immunity on airport assets.
Highly ranked sources said the risk presented by the Financing Agreement on March 7, 2019, prompted Uganda to send an 11-member delegation to Beijing to plead with Exim Bank to renegotiate the clauses now impugned by Kampala.
The failure to renegotiate the toxic clauses has exposed Entebbe International Airport and other government assets staked for the $200 million loan to seizure. The revelation that Uganda government signed an agreement and, among others, waived immunity for its sovereign assets has raised questions about the level of scrutiny and due diligence that bureaucrats conduct before committing the country internationally.
This is not the first project financed by China's Exim Bank. The bank has funded about 85 percent of two major Ugandan power projects - Karuma and Isimba dams. The Chinese Bank also financed and built Kampala's $476 million Entebbe Express Highway to Entebbe.
