China’s debt trap strategy: Uganda loses its only international airport to China for failing to repay loan

Another nation has fallen prey to what is popularly called China’s ‘debt trap’ strategy. Uganda has lost its only international airport, the Entebbe International Airport, to China for failing to repay a loan, African media reported.

The government has failed to reverse a loan agreement with China which had repayment conditions for attaching its only airport.

In 2015, China’s Export-Import (EXIM) Bank lent Uganda $207 million at two per cent upon disbursement. The loan, meant for the expansion of Entebbe airport, came with a maturity period of 20 years including a seven-year grace period, News X reported.

However, as per international media reports, the Ugandan government waived off the clause for international immunity for securing the loan, following which the Chinese lender can retake possession of Entebbe International Airport without any international arbitration.

A statement from the Uganda Civil Aviation Authority (UCAA) reportedly suggested that some provisions in the Financing Agreement with China exposed Entebbe International Airport and other Ugandan assets to be attached and taken over by Chinese lenders upon arbitration in Beijing.

Last week, Ugandan Finance Minister Matia Kasaija had apologised to Parliament for “mishandling” the multi-million dollar loan.

The government has failed to modify the loan arrangement with the Chinese that had repayment restrictions that included the attachment of the country’s sole airport.

According to the latest media reports, a delegation of Ugandan officials also visited China earlier this year in an attempt to renegotiate the clauses of the loan agreement. However, the visit was unsuccessful as the Chinese authorities refused to allow any alteration in the original terms of the deal.

On November 17, 2015, the Uganda government, represented at the time by the finance ministry and the Civil Aviation Authority, signed an agreement with the Export-Import Bank of China (Exim Bank) to borrow US $207 million at 2% upon disbursement, with a 20-year maturity period and a seven-year grace period.

The agreement reached with the Chinese financiers effectively “surrendered” Uganda’s most important airport to China, reports said.

Some stipulations in the Financing Agreement, according to the Uganda Civil Aviation Authority (UCAA), subject Entebbe International Airport and other Ugandan assets to being attached and taken over by Chinese lenders following arbitration in Beijing.

Uganda’s request to amend the loan’s hazardous conditions was denied by China, putting Ugandan President Yoweri Museveni’s administration in uncertainty. 

The Ugandan government sacrificed international immunity in the agreements it made to acquire the loans, exposing Entebbe International Airport to takeover without international protection, according to the Daily Monitor of Uganda.

Uganda’s Finance Minister, Matia Kasaija, apologised to parliament last week for the “mishandling” of the $207 million loan. 

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