On Thursday, the Finance Ministry of Uganda said that the government had inked a $500 million loan arrangement with South Korea to assist in infrastructure development. The Exim Bank’s loan is intended to assist Uganda in growing its infrastructure projects; however, the exact nature of the projects is unknown.
Uganda’s minister of finance, Matia Kasaija, and South Korea’s minister of foreign affairs, Cho Tae-Yul, signed the loan deal. This signing, which occurred on the sidelines of the Korea-Africa summit in Seoul, is more evidence of the strengthening of political and economic links between the two countries.
The inflow of funds is likely to improve Uganda’s infrastructure, but it also makes one wonder if the government can manage its debt. As of December 31, Uganda’s state debt had risen to $24.6 billion, mostly due to substantial investments in infrastructure. After Moody’s just downgraded Uganda’s credit rating, the extra $500 million loan may make things worse. Concerns over Uganda’s capacity to handle and repay its mounting debt made the rating agency identify “diminished debt affordability” as a major factor in the downgrading.
The Ugandan government is determined to go forward with its programme for infrastructure development, which is vital for reducing poverty and boosting the economy.
