Uganda acquires $500m loan from S.Korea

Peter 10th Jun, 2024 Economy Business Edge Reporter
Uganda acquires $500m loan from S.Korea

Matia Kasaija (L) and South Korea's Minister of Foreign Affairs Cho Tae-Yul, sign the loan agreement.

Uganda has signed an agreement with South Korea for a $500 million loan to help finance infrastructure building in the east African country, Uganda's finance ministry has said.

South Korea's EXIM Bank will provide the loan, the ministry said in a post on X. It didn't provide details on what kind of infrastructure the money would fund but Uganda mostly borrows for road and energy projects.

The new credit adds to Uganda's growing debt problems that prompted ratings firm Moody's to downgrade the country’s rating, citing "diminished debt affordability."

  • As of Dec. 31, Uganda's public debt stood at $24.6 billion. Moody’s said the downgrade of the ratings reflects diminished debt affordability and increasingly constrained financing options, amid greater reliance than in the past on comparatively costly domestic and non-concessional sources of external financing.

According to Moody’s, the ongoing suspension of new World Bank loans risks adding to the government’s growing dependence on non-concessional financing, given that World Bank was one of Uganda’s largest creditors, accounting for around a fifth of Uganda’s public debt.

The ratings firm added that Uganda’s external vulnerability risk remains elevated, a reflection of a more challenging external debt servicing profile, the persistence of tighter global financial conditions, and diminished foreign exchange reserve adequacy.

  • The new loan agreement was signed by Uganda's finance minister, Matia Kasaija and South Korea's Minister of Foreign Affairs Cho Tae-Yul on the sidelines of the Korea-Africa summit in Seoul, South Korea.
Uganda acquires $500m loan from S.Korea

During the summit, South Korean President Yoon Suk Yeol and the leaders of African countries agreed to forge deeper trade and business cooperation and launched a "critical minerals dialogue" aimed at sustainable development of the continent's resources.

Hosting a first-ever summit with the leaders of 48 African nations, Yoon said South Korea would increase development aid for Africa to $10 billion over the next six years as it looks to tap the continent's rich mineral resources and potential as a vast export market.

Nearly 50 deals and agreements were reportedly South Korea's first summit with leaders from 48 African countries to cooperate in areas such as mining, energy and manufacturing, South Korea's industry ministry said on Wednesday.

President Yoon pledged that South Korea would increase development aid for Africa to $10 billion over the next six years, and would offer $14 billion in export financing to promote trade and investment for South Korean companies in Africa.

  • The African leaders also welcomed South Korea's "Tech4Africa" initiative aimed at supporting the education and training of Africa's young population.

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