The government of Uganda and China are to jointly provide funding for the construction of the 2 billion dollars Karuma hydro electricity project, according to a Ministry of Energy official.
The project that was recently awarded to Sinohydro, a Chinese firm is expected to produce a 600 megawatts power plant, the biggest such facility in Uganda. Yusuf Bukenya Matovu, the Head of Communications at Uganda’s Ministry of Energy told local media that government would use money from the Energy Fund as well as credit from China to fund the project.
Bukenya added that proceeds from the recently discovered oil would be used to finance future energy infrastructure projects. According to Emmanuel Mutebile, the Governor Bank of Uganda, a total of 449 million dollars, which is equal to shillings 1. 1 trillion had been realised from oil through taxes by July 21 2011.
A 2012 Energy report says that the 600 megawatts Karuma Hydropower Project is estimated at US dollars 2.2 billion however the signed contract is reported at US dollars 1.65 billion. The report adds that government would provide US dollars 700 million co-financing while China provides concessional funding amounting to US dollars 500 million.
The Ministry of Energy report stated that government had already secured and budgeted for the work with a budgetary allocation of shillings 1,043 billion. The project was initially planned to begin earlier but delayed due to procurement hitches.
According to the Ministry of Finance, Planning and Economic Development, the delays to begin the power project affected the economy negatively by reducing domestic development expenditure.
Maria Kiwanuka, the Finance minister said that total expenditure releases during the 2012/2013 financial year failed to meet the targeted shillings 9,869 billion. She explained that the shortfall amounted to shillings 137 billion, mainly due to the delay to start the Karuma Hydro power station construction.
Kiwanuka emphasized that access to electricity was essential for economic development especially for agricultural and industrial processing and production. Other power projects lined up for development include the 600Megawatts Ayago power project and 140 Megawatts Isimba Hydro Power Project.