Kenyan Bank Seizes Uganda’s Main Airport because China Funds Projects in Kenya

Kenyan Bank Seizes Uganda's Main Airport because China Funds Projects in Kenya
Entebbe Airport’s main entrance. /COURTESY

The Chinese Exim Bank, which supported Kenya’s Standard Gauge Railway (SGR) and other infrastructure development projects, is attempting to acquire Uganda’s Entebbe International Airport.

Following the delayed repayment of a Ksh22 billion loan owed to a Chinese lender, Kampala now faces the possibility of losing its only international airport.

According to the Daily Monitor, the bank turned down Uganda’s request to re-negotiate a loan government took out in 2015 to develop the airport.

11 Ugandan officials had been to Beijing to persuade the bank to amend the conditions in order to avoid the attachment of the country’s assets.

“Our research revealed that any lender proceedings against Uganda Civil Aviation Authority (UCAA) assets would not be shielded by sovereign immunity because the Uganda government relinquished the immunity on airport assets in the 2015 arrangement,” says the report.

According to the Daily Monitor, any changes to the condition, according to four Exim Bank executives, would set a poor precedent for the future.

The Exim Bank had withheld funding and alleged a violation of the loan agreement before the 11-member delegation’s trip because UCAA had failed to implement several of the conditions that were unfavorable to Uganda.

One of the clauses requires UCAA to establish an escrow account to hold the Authority’s revenues and not to spend the funds in the account.

Exim Bank discovered that the loan agreement provisions were not being followed, and as a result, cash flow to the Chinese contractor was halted.

Following objections from Chinese lenders, Kenya has dropped its proposal for China to extend the debt repayment vacation until December.

The National Treasury said in August that it will not seek a debt relief extension beyond June.

Exim Bank of China, which funded the construction of the Standard Gauge Railway, has been promised full payment by the Ministry (SGR).

“There has been no appeal to the Chinese government to extend the debt moratorium. Kenya is paying the Exim Bank to service its debts in accordance with the DSSI agreement “Julius Muia, the Principal Secretary of the Treasury, remarked.

The US Treasury’s response came in response to news that a Chinese lender was attempting to take Kenya’s port assets due to a loan default.