Uganda: Umeme Buyout Reduced Borrowing by Shs270 Billion

• The Ugandan government reduced its borrowing for the buyout of former electricity distributor Umeme, whose concession ended on March 31, 2025, by approximately 270 billion shillings, or US$72.6 million, compared to the amount Parliament authorized.
• This reduction was achieved because the Auditor General recommended a payout of US$118.39 million, significantly less than the US$190.99 million initially approved by Parliament.
• Parliamentary conditions mandated that only Auditor General-verified amounts be paid to Umeme and that any unused borrowing capacity be cancelled.
• The government secured the necessary financing from Stanbic Bank Uganda Limited and Standard Bank of South Africa Limited.
• Umeme Company Limited has since proceeded to international arbitration in London to seek further reconciliation, including potential claims for supplementary payments, damages, and interest, indicating ongoing financial exposure for the government.

This reservation means that while the government contained its initial borrowing requirement, it could still face additional financial obligations depending on the outcomes of future negotiations or dispute-resolution processes.

The Ugandan government successfully curtailed its borrowing for the acquisition of former electricity distributor Umeme Company Limited, whose concession ended on March 31, 2025, avoiding an estimated 270 billion shillings in additional national debt. This significant reduction, representing nearly 38 percent of the borrowing ceiling initially approved by Parliament, stemmed directly from a thorough assessment conducted by the Auditor General. Parliament had previously authorized the government to secure up to the euro equivalent of US$190.99 million, approximately 711 billion shillings, to facilitate the Umeme concession exit payment.

Ultimately, the government borrowed a substantially lower sum, drawing only the equivalent of US$118.39 million, or about 440 billion shillings. This decision meant that roughly US$72.6 million, or 270 billion shillings, remained unborrowed. The necessary funds, equivalent to €106.81 million, were secured through a financing agreement with Stanbic Bank Uganda Limited and Standard Bank of South Africa Limited, with the facility drawn on May 29, 2025, and deposited into the Government of Uganda's euro holding account at the Bank of Uganda.

This fiscal restraint was a direct consequence of stringent conditions imposed by Parliament and the constitutional framework governing government borrowing in Uganda. When Parliament granted its approval for the borrowing on March 20, 2025, it explicitly stipulated that the Umeme payout should only occur after the amount had been verified, approved, or recommended by the Auditor General, setting a deadline of March 31, 2025. This critical directive prevented the government from incurring unnecessary debt.

Furthermore, Parliament mandated that any unused balance of the approved borrowing ceiling would be cancelled, ensuring it would not contribute to Uganda's public debt. The Auditor General's final special audit report, dated March 26, 2025, proved instrumental by recommending the precise payout of US$118.39 million. This recommendation directly informed the government's decision to borrow only the certified amount, as detailed in a report presented to Parliament by the Minister of State for Finance, Planning and Economic Development in charge of Micro-Finance, Shartsi Kutesa Musherure, and signed by Minister of Finance, Planning and Economic Development Henry Musasizi on August 12, 2026. Article 159 of the Uganda Constitution borrowing framework underscores this process, requiring all government borrowing, guarantees, and loans to be authorized by or under an Act of Parliament.

Despite the immediate reduction in the Uganda government Shs270 billion debt, the financial implications of the Umeme buyout may not be entirely concluded. Documents submitted to Parliament reveal that Umeme Company Limited has since proceeded to international arbitration in London to pursue further reconciliation regarding the final buyout amount, including potential claims for supplementary payments, damages, and interest.

This ongoing arbitration means that while the government contained its initial borrowing requirement, it could still face additional financial obligations depending on the outcome of the dispute-resolution process. The lower payout, therefore, did not necessarily bring a complete end to the financial dispute surrounding Umeme's exit, highlighting the complex nature of large-scale public-private partnership terminations and the potential for post-settlement disputes.

This development underscores the critical role of the Auditor General and parliamentary oversight in government financial transactions and debt management in Uganda. Lawyers advising on public-private partnerships or government contracts should note the strict adherence to approved borrowing ceilings and the potential for post-settlement disputes, as Umeme reserved rights for further reconciliation.

Source: Original reporting via URN