Uganda’s government is considering selling about $1 billion of Eurobonds, joining East African neighbors Kenya and Rwanda in raising cash on global markets to build infrastructure needed for economic growth.
The government has ample room to borrow because previous debt has been raised on a concessional basis, with terms including interest rates of less than 1 percent and 10-year grace periods, Finance Minister Maria Kiwanuka said in an interview with Bloomberg TV Africa that aired on Sept. 27. That’s left the country with debt-servicing costs amounting to about 10 percent of the 15 trillion-shilling ($5.7 billion) budget, she said.
“We are looking at the external markets,” Kiwanuka said, without saying when an offering is planned. “What we want to make sure of is that we have viable projects ready for market.”
Uganda, Africa’s biggest coffee exporter, is building roads, railways, power plants and an oil refinery to help sustain economic growth forecast by the International Monetary Fund at 6.4 percent this year compared with 6 percent last year. African nations from Senegal to Kenya have accessed international capital markets this year as borrowing costs dropped to a 15-month low on Sept. 8, according to JPMorgan Chase & Co.
Kenya, East Africa’s biggest economy, sold $1.5 billion in its debut Eurobond offering in June at a coupon of 6.875 percent. The yields rose 13 basis points to 6.113 percent by close yesterday in Nairobi. Rwanda sold its first dollar notes last year.
Oil Reserves
Uganda has recoverable oil reserves estimated at 1.4 billion barrels and is exploring deposits of minerals including copper, columbite-tantalite and gold that may be worth “even more” than its petroleum resources, Kiwanuka said.
Uganda’s main infrastructure projects include the planned $8 billion standard gauge railway network, to be developed by Chinese companies, which will connect to networks of neighboring Kenya, Rwanda and South Sudan. The 600-megawatt Karuma hydropower dam and the 183-megawatt Isimba hydropower plant under construction by Chinese companies together will almost double the nation’s generating capacity from 810 megawatts.
Uganda is “very carefully prioritizing” its needs before entering foreign debt markets, Kiwanuka said. “It will definitely go only to income-generating projects, like power stations, or a railway line, or transmission-line roll-out where the project itself can generate an income stream from consumers to pay for the debt service.”
The government expects to select the winning bidder to build a 60,000 barrel-per-day oil refinery by the end of this month, Kiwanuka said. In June, the government announced it would begin negotiations with groups of companies led by SK Group of South Korea and RT Global of Russia to build the facility, which is estimated to cost about $2.5 billion.
Source: http://www.businessweek.com/news/2014-09-29/uganda-mulls-1-billion-eurobond-debut-to-fund-infrastructure