China puts 'aggressive' terms on Entebbe Airport loan - researchers

Entebbe International Airport

Passengers arriving on international flights leave the international arrivals lobby at Entebbe International Airport. Uganda will channel all revenue from the airport into an account held jointly with the lender.

Photo credit: File | AFP

A top Chinese lender has imposed "aggressive" repayment terms on a $200 million loan to expand Uganda's Entebbe International Airport, US-based research lab AidData says, criticising the bank for forcing the government to repay its debt before funding public services.

Chinese state banks are the biggest source of infrastructure funding to Africa, and have been criticised for their predatory lending practices although details of contracts are rarely made public.

Under the loan from China's Exim Bank to modernise the Entebbe Airport, the Ugandan government is required to channel all revenue from the country's only international airport into an account held jointly with the lender, according to the contract published Monday by AidData.

The government is then required to use part of the revenue to repay the loan each year, before it can invest in public services.

"These are (more) aggressive terms than what we have seen earlier," Bradley Parks, executive director at AidData, told AFP, saying the contract "limits the fiscal autonomy of the government".

State-owned China Communications Construction Company began repairing runways and building new airport hangers in Entebbe in 2016 and the work is expected to be completed this year.

Chinese creditors— unlike other lenders from developed nations— require governments to deposit some earnings from big infrastructure projects in bank accounts they control to serve as collateral.

But the contract for the Ugandan airport goes further.

"The lender is asking not just for revenues from the new projects they are funding, but also from the underlying asset, or the airport, that already exists," Parks said.

The airport, built in 1951, was generating about $68 million in annual revenue prior to the expansion project and the money was used to fund public services according to Parks, citing data from the government.

The project led to public outrage last year after Ugandan media reported China will take control of the airport if the government in Kampala defaulted, a claim that Beijing later denied.

China Exim Bank did not respond to a request for comment.

US Treasury Secretary Janet Yellen this month said China needs to contribute more to global efforts to provide debt relief for poor nations that are struggling to repay after the pandemic battered their economies.