The Uganda Bankers Association fronted a proposal for issuance of a Treasury bond by the Finance ministry but there are few signs of progress
Uganda Bankers Association (UBA) says road contractors are owed Ush1.3 trillion ($344.9 million) by government in unpaid invoices linked to existing road projects across the country.
Whereas UBA fronted a proposal for issuance of a Treasury bond by the Ministry of Finance, Planning and Development meant for settlement of those arrears, there are few signs of progress regarding this proposition, a scenario that could escalate the financial dilemma faced by banks and affected road contractors.
Most of the local road contractors usually borrow money from commercial banks for working capital needs or procurement of construction machinery, sources indicated.
Uganda’s road network comprises 159,366 kilometres of urban and national roads, according to government data. The feeder and rural road network that includes district and community roads accounts for 118,550 kilometres.
Budget allocations for the works and transport sector increased from Ush6.92 trillion ($1.8 billion) in financial year 2025/26 to Ush8.79 trillion ($2.3 billion) in financial year 2026/27, amid new funding packages allocated to large road rehabilitation projects. “That idea has been fronted a few times. Implementing it would help government deploy a liquid instrument that would offset all those arrears, redeem the treasury bond at maturity and also unlock loan default provisions held on banks’ balance sheets. That money would be channelled to the profit or loss account and would increase profits for the banks and income taxes paid by banks to Uganda Revenue Authority (URA). “Pricing such a treasury bond would depend on where the market is. Government could choose a 10 year treasury bond which would cost more in terms of interest incurred or might opt for a three year treasury bond in case oil and gas revenues come in early. Other factors at play include government cashflow movements, competing expenditure priorities and tax collections. The biggest challenges behind domestic arrears range from corruption, bureaucracy and poor planning in many government entities,” said Charles Katongole, a senior executive at Standard Chartered Bank Uganda. “I’ve not seen a letter from the commercial banks to that effect but most of the work certificates submitted by the Ministry of Works and Transport last year were cleared after verification by the Accountant-General’s Office. The procurement regulations were recently revised and do offer some incentives for local contractors,” said Patrick Ocailap, Deputy Permanent Secretary at Uganda’s Finance Ministry.
Delayed payments to road contractors are partly blamed for delayed road projects witnessed across Uganda. Some 28 projects experienced delays while 13 were abandoned, according to the Auditor-General’s report for financial year 2024/25. “Delayed payments is the biggest headache for road contractors working on government projects. That is the reason why big construction companies prefer pursuing projects funded by donors and multinationals because they are guaranteed payment on time and approvals for work certificates are fairly quick. But a contractor who takes on a government funded road project would need back up cash that should cover them for about 8-9 months as they wait for payment from government,” argued Charles Eibu, who runs a construction company.
This would be cheaper than borrowing money from a commercial bank at very high interest rates. Most of the multinationals in this town pay contractors and suppliers after 30 days upon receiving an invoice. Getting approval for a work certificate is not very hard. One might get an approval today and payment might come after seven months. There is also a challenge of gaps in budget allocations and disbursements. The Ministry of Works and Transport might send a requisition for Ush100 billion ($26.5 million) to the Ministry of Finance but the latter might disburse just Ush15 billion ($3.9 million). This means the Ministry of Works and Transport will split that amount among different contractors and each will get less than what they expected,” argued Charles Eibu, who runs a construction company.
