Uganda risks losing its only International Airport and other government assets to China over a loan it secured in 2015.
This is after the lenders in China declined to renegotiate toxic clauses in the agreement when the $200 million was given to the country to expand the Entebbe International airport.
It has now emerged that the country willingly surrendered the airport to China by signing the agreement.
The loan had a 20-year maturity duration, plus a seven-year grace period and the concern is that the country might fail to meet its rigorous debt payback schedule.
The agreement was signed by Uganda and the China’s Export-Import (Exim) Bank on March 31, 2015 and failure to amend it, Uganda’s sovereign assets are exposed to attachment and takeover upon arbitration awards in Beijing.
This is because Uganda will not be protected by sovereign immunity against any further actions that the lenders might take because the government waived the immunity on airport assets during the 2015 deal to secure the loan.
Uganda Civil Aviation Authority(UCAA) sought to amend 13 toxic clauses in the loan agreement, that are unfair and erode the sovereignty of the country. The clauses include:
The agreements authorizes Exim Bank to approve UCAA withdrawals yet there is a statutory board mandated to do so, surrendering under the airport loan agreement of the approval of UCAA budget, master and strategic plans, which ordinarily are the mandates of the aviation regulator’s board, to Exim Bank in Beijing among others
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.
However, Exim Bank officials rejected the amendments and warned Uganda that any attempts to make alterations would set a bad precedent adding that they saw no cause to approve the amendments.
The officials asked the country to accept friendly consultations to ensure that the expansion project runs smoothly.
The delegation to Uganda was dispatched after China stopped funding the expansion project violation of the loan agreement after UCAA failed to implement some of the clauses, which were not favorable to Uganda.
The Chinese agreed to resume bankrolling the project, but refused to amend the problematic clauses that they signed with the government of Uganda.
They instead proposed a clarification of the contentious clauses, which UCAA now considers insufficient.
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