Parliament has approved government's request to borrow Shs 353 billion from the International Fund for Agricultural Development (IFAD) to finance the proposed Resilient Livestock Value Chain Project. The approval was granted on Monday after heated debate over Uganda's growing debt levels and the potential benefits of the project.
Presenting the proposal, State Minister for Finance (General Duties), Henry Musasizi, said the initiative is designed to transform Uganda's cattle corridor and improve the livelihoods of over 400,000 households, reaching nearly 20 million people across 55 districts including Kumi, Kabale, Kasese, and Namutumba.
According to Musasizi, the total project cost will amount to Shs 717.29 billion. Out of this, Shs 348.66 billion will come from Uganda's IFAD Performance-Based Allocation System and the IFAD Borrowed Resource Access Mechanism.
An additional Shs 175.1 billion will be contributed by the Global Environmental Facility and the Green Climate Fund, while Shs 52.53 billion will be provided by the Africa Rural Climate Adaptation Finance Mechanism.
Keep up with the latest headlines on WhatsApp | LinkedIn
Government's contribution will total Shs 121.5 billion in cash and in kind, while project beneficiaries are expected to provide Shs 31.6 billion.
"The goal of the project is to contribute to improved livelihoods of smallholder livestock farmers in Uganda, to enhance income, nutrition, and resilience of smallholder dairy and beef producers," Musasizi said.
He assured legislators that the loan terms are favorable, with a 50-year repayment period, a 10-year grace period, zero interest, and only a 0.1 percent service charge.
He further revealed that the funds must be signed off by September 12 or Uganda risks losing not only this financing but also other programmed borrowing under IFAD.
Despite concerns about Uganda's debt sustainability, Musasizi insisted the country's borrowing remains manageable in the medium term.
Uganda's debt burden stood at Shs 106.97 trillion as of December 2024, the public dept stood at Shs 112.8 trillion by the end of December split almost evenly between external and domestic borrowing.
The loan approval will increase Uganda's external debt by Shs 366.5 billion, raising the debt-to-GDP ratio by 0.16 percent.
The chairperson of the Committee on National Economy, John Bosco Ikojo, recommended approval of the loan but urged government to prioritize project implementation rather than administrative costs.
The committee raised concern that Shs 10.3 billion had been earmarked for vehicles, Shs 16.4 billion for consultancies, and Shs 15.1 billion for training and workshops.
noted that the plan to acquire fifteen vehicles would cost up to Shs 671 million each. He recommended that government renegotiate with IFAD to redirect resources from consumptive items to inputs, goods, and equipment that directly benefit farmers.
Kumi Municipality MP, Silas Aogon, welcomed the loan approval, noting that rural communities would, for the first time, stand to gain significantly from borrowed funds.
"Most of the money that we have been borrowing has been benefiting the people in urban areas. Why don't you allow people from the rural areas, for the first time, to also see something?" he said.
He praised the favorable terms of the loan, highlighting the rare zero-interest rate arrangement.
However, some legislators opposed the borrowing, warning that the project risked mismanagement.
Butambala County MP, Muhammad Muwanga Kivumbi, argued that the funds were heavily tilted toward government departments rather than farmers.
"Most projects we have looked at don't place money where it is adequate. It goes to components where it is easy to eat the money, through consultancy, through management, and other things. This looks like a classical failed project that is intended to benefit only the rich, not the real farmers," Kivumbi said.
Sign up for free AllAfrica Newsletters
Get the latest in African news delivered straight to your inbox
Kira Municipality MP, Ibrahim Ssemujju Nganda, also criticized the committee for recommending approval despite pointing out flaws in the project design.
"The committee report says go and renegotiate this request. I don't know what's wrong with colleagues. That you can say all the things that you have said, and then you say you want the loan approved," he said.
Ssemujju warned that Uganda's debt is already high enough and should not be worsened with additional borrowing.
The Resilient Livestock Value Chain Project is expected to enhance smallholder farmers' resilience against climate change, improve access to markets, and strengthen livestock production systems. Whether its impact will meet the ambitious promises remains to be seen as Parliament looks forward to monitoring its implementation.
