Published on 30/04/2025
Parliament has been informed that Uganda’s road construction sector is grappling with a combined debt of UGX5.2 trillion.
This includes UGX3.491 trillion owed to Project Affected Persons (PAPs) and UGX1.73 trillion in unpaid certificates to contractors for completed works.
The revelation was made by Tony Awany, Vice Chairperson of the Parliamentary Committee on Physical Infrastructure, while presenting the 2025/26 Ministerial Policy Statement for the Ministry of Works and Transport during the April 16, 2025, plenary sitting.
Citing the December 2024 Audit Report, Awany said, “As of October 2024, unpaid liabilities amounting to UGX3.491 trillion were identified under land acquisition programmes managed by the Ministry of Works and Transport. Failure to compensate PAPs is not only unconstitutional but also disrupts project timelines and leads to increased administrative costs and potential litigation.”
He warned that continued delays in compensating PAPs and contractors’ risk further escalating project costs.
The Committee also raised alarm over the inadequate budgetary allocation to settle arrears. Awany explained that while the sector requires UGX1.73 trillion to clear outstanding certificates, only UGX150 billion has been allocated, leaving a funding gap of UGX1.581 trillion.
“This underfunding reflects poor budgeting practices and exposes Government to penalties, litigation, and loss of confidence among contractors,” Awany stated. “Delays in payment threaten contractors’ assets, many of which were pledged as collateral to secure loans.”
He noted that commercial banks—primary financiers of the construction sector—are losing confidence in Government-funded projects due to persistent delays, making project financing more expensive and local contractors less competitive.
“Contractors are unable to meet ongoing obligations or continue works. The ripple effect is choking smaller businesses along the supply chain,” he added.
The Committee estimates that the Government incurs daily interest charges of UGX284 million on these arrears. Parliament is now urging the Government to provide an additional UGX1.581 trillion to clear the outstanding debt, in line with Article 26 of the Constitution, which guarantees prompt compensation.
Legislators also expressed concern about the high cost of commitment fees on undisbursed donor loans. The Committee cited three donor-funded projects—North Eastern Road-Corridor Asset Management Project, Kabale–Lake Bunyonyi/Kisoro–Mgahinga Roads Upgrading Project, and the Kampala–Jinja Expressway—where US$458.76 million (UGX1.683 trillion) remains unutilized.
Awany said these idle funds have accumulated commitment fees of US$10.63 million (UGX39.01 billion) since the projects took effect. According to the June 2024 Audit Report, undisbursed funds across various projects have cost the Government a total of US$21.57 million (UGX79.16 billion) and UA1.44 million in avoidable financial charges.
He urged Government to automate procurement processes and ensure timely disbursement of funds to avoid further losses due to inefficiencies and corruption.
In response, Maracha County MP Denis Oguzu criticised the Executive, particularly the Ministry of Finance, for enabling the accumulation of avoidable arrears.
“Loans remain idle while roads deteriorate. The Finance Ministry has failed to manage the economy and continues to burden us with unnecessary arrears,” Oguzu said.
The Committee also called for measures to address the high cost of credit for local contractors. Awany noted that while foreign firms access loans at interest rates as low as 2%, Ugandan contractors face rates above 23%.
“This cost disparity prevents local firms from securing guarantees, procuring equipment, or retaining skilled personnel. As a result, over 80% of civil works contracts are still dominated by foreign companies,” Awany said.
To level the playing field, Parliament recommends that Government increase funding for the Uganda Development Bank Limited (UDBL)’s Ugandan Contractors Financing Initiative from UGX150 billion to UGX500 billion, with interest rates capped at 5%. MPs also want a UGX500 billion Construction Guarantee Pool set up in state-owned banks to help local firms access performance and payment guarantees.
Meanwhile, the Integrated Transport Infrastructure Services (ITIS) programme is projected to receive a 29% budget increase from UGX4.917 trillion to UGX6 trillion in the 2025/26 financial year. Over the medium term, the budget is expected to rise until FY 2027/28 before tapering off.
Documents before Parliament show that the Ministry of Works and Transport’s overall budget will increase by 22% from UGX2.025 trillion to UGX6.496 trillion in FY2025/26. This increment is largely attributed to the integration of the Uganda National Roads Authority (UNRA) and Uganda Road Fund (URF) into the Ministry under the RAPEX programme.
