By David Malingha Doya | From Bloomberg News
The Kampala Capital City Authority asked Uganda’s government to review its debt ceiling amid plans to raise $500 million to upgrade the city’s road network over the next three years.
The KCCA presented its proposal to the cabinet last week and expects a decision this month, Jennifer Musisi, executive director of the authority, said Monday in an interview in the Kenyan capital, Nairobi. Once approved, the authority plans to sell at least 40 billion shillings ($14 million) of municipal bonds by next year, Musisi said.
“The International Finance Corp. is preparing us to get a credit rating, which we need to show our credit-worthiness,” she said. “We want the debt ceiling either increased or removed, so that we can borrow in accordance with our credit- worthiness.”
Infrastructure in Kampala, which the Uganda Bureau of Statistics says has a population of 1.72 million people, is being upgraded after 40 years of neglect by city authorities that led to a “near total breakdown” of service delivery and law and order, according to the KCCA’s website. The KCCA has a budget of 268.7 billion shillings this year that will mostly be spent on improving the road network and other public structures.
KCCA expects to collect at least 80 billion shillings in revenue in the financial year through June, compared with 72 billion shillings a year earlier on improved efficiency in financial management, according to Musisi. Revenue collection has more than doubled over the past three-and-a-half years, while its asset base has expanded 10-fold to 450 billion shillings.
“At the current debt ceiling, we can only borrow about 7 billion shillings, and we think we are able to borrow much more than that,” Musisi said.
The KCCA announced plans yesterday to reintroduce commuter rail services to Kampala for the first time in 20 years. The service is part of a transport plan that aims to decongest the city’s roads.
Uganda, Africa’s biggest coffee exporter, is rated B1 by Moody’s Investors Service and B by Standard & Poor’s, four and five steps below investment grade respectively. The government is considering selling $1 billion of Eurobonds to build infrastructure, Finance Minister Maria Kiwanuka said in September.
The East African nation’s economy is forecast to expand 6.3 percent this year, compared with 5.9 percent in 2014, according to the International Monetary Fund.
Uganda’s shilling opened Tuesday trading 0.2 percent weaker at 2,898.35 per dollar, extending year-to-date losses to 4.6 percent.
