Uganda SGR plan on track as Kenya pursues China bond

Zawya

23-06-2025

The Ugandan government has earmarked Ush2.17 trillion ($560.2 million) in the next financial year for construction of the standard gauge railway, signalling that the long-awaited works on the Malaba-Kampala line are about to start.
This financing comes from the Islamic Development Bank (IsDB), with the government providing Ush79.03 billion ($21.9 million).
With a 19.4 percent the financing of the Malaba-Kampala stretch secured, construction is set to begin after a decade of waiting, on one of the Northern Corridor Integration Projects (NCIP), which aims to enhance regional trade and connectivity.'In November 2024, President Yoweri Museveni launched construction of the 272-kilometre standard gauge railway (SGR) from Malaba to Kampala. The SGR is a strategic investment for our country. It will cut cargo transport cost by half from the current 120 per tonne and reduce transit time from Mombasa to Kampala from seven days to one day, turning Uganda into a land-linked country as opposed to being landlocked,' said Finance minister Matia Kasaija in his budget speech on June 12.
Uganda's SGR has faced delays largely due to funding headaches, after many potential financiers withdrew from bankrolling the project, until Kampala recently negotiated for $800 million in funding from the IsDB.
The financing agreement was reached on May 20, 2025, during the IsDB's 50th Annual Meetings in Algiers, the three-year agreement forming part of Uganda's Country Engagement Framework (CEF) for 2025–2027.
Construction players say an NTP is a formal authorisation issued by a project owner, giving a contractor the green light to begin work on a project. The NTP is a critical milestone, ensuring that all necessary contractual, financial, and regulatory requirements are in place before any site activities kick off.
The NTP's current funding helps the start of civil works as the remaining parties seek to conclude the syndicated loan deal with multiple lenders, including UK Export Finance, Turkish Exim Bank, and China Exim Bank.
The total land acquisition estimate from Malaba to Kampala currently stands at Ush620.87 billion ($172 million) covering about l35 kilometres out of the 232 kilometres mainline right of way, which is about 58 percent. Land compensation has been done from Malaba to Buikwe, and will be continued to Kampala depending on availability of funds.
Meanwhile Kenya is looking to raise Ksh358 billion ($2.77 billion) from the Chinese money markets to put on track its standard gauge railway from Naivasha to Malaba as Uganda announced its readiness to start construction on the other side of the border towards the capital Kampala.
Kenyan Treasury has been in China to fine-tune details on Nairobi's maiden Panda bond and government sources privy to the deal told The EastAfrican that issuance was being fast-tracked to float the bond in Shanghai before the end of this year.
A Panda bond is a sovereign facility issued in the Chinese domestic market and denominated in Yuan Renminbi targeting Chinese investors and institutions.'The bond is Ksh358 billion ($2.77 billion) and there is a mission there in China which are working on the details of that Panda bond. There are currently two officers from the Treasury in China working on that bond,' the source said.'We are still coming up with structures around it (Panda bond) but we have agreed the project (SGR) is going to be funded by the Chinese. In principle, we have agreed but it is still at the conceptual level but I believe it is going to be done before the end of this year. Give it another two to three weeks then we will know how the funding will be done.'China was the key financier of the first two SGR phases—from Mombasa to Nairobi, and then from Nairobi to Naivasha dry port—through loans from the China Export-Import (Exim) Bank.
Beijing, however, pulled out of the Malaba extension after Naivasha, citing concerns over its commercial viability and Kenya's rising debt, which raised the risk of loan default—including on Chinese credit.
After years of seeking alternative financing, Kenya recently returned to Beijing for funding and last week Prime Cabinet Secretary and Foreign and Diaspora Affairs secretary Musalia Mudavadi said Nairobi was banking on Chinese support to ensure the Panda bond is floated at the start of the next fiscal year.'Panda bond discussions have started and Kenya looks forward to the support of China,' he said after meeting with Chinese counterpart Wang Yi in Changsha, the capital of Hunan province in Southern China.
Mudavadi was in China to attend the Ministerial meeting of Coordinators on the Implementation Follow-up Actions of the Forum on China-Africa Cooperation.
If successful Kenya would become the second African country, after Egypt, to access the Chinese capital markets through a Panda bond.
Cairo raised $480 million via such an instrument in October 2023, which was priced at 3.5 percent for a three-year period.
But Nairobi has since expressed difficulty in raising its share and requested additional Chinese support.
During President William Ruto's state visit to Beijing in April, the two countries signed a deal to jointly finance the 475-kilometre rail from Naivasha to Malaba, where it is expected to link with Uganda's own SGR extending to Kampala.
Lack of a rail link between Kenya and Uganda has meant that most cargo from the Mombasa port is transported by road to Uganda, Rwanda, Burundi, South Sudan and DRC. This overreliance on roads increases both time and cost.
But financing constraints in both Kenya and Uganda have long delayed efforts to complete the Naivasha-Kampala railway connection, pushing both governments to court new financiers for their respective sections.
With concessional funding drying up—following the expiry of an international programme in March—bonds issued in China, Japan, or the United Arab Emirates (UAE) appear more attractive, especially as Eurobond yields remain high.
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