Uganda eyes first Sukuk to fund $3.2 billion railway expansion

Uganda is preparing to enter the Islamic finance market for the first time with a sovereign sukuk aimed at funding its long-delayed Standard Gauge Railway (SGR), a $3.2 billion infrastructure project designed to reshape regional trade logistics.

The planned issuance will cover roughly 15% of the total project cost, according to the Ministry of Finance. The initiative marks a strategic shift as Kampala diversifies funding sources beyond traditional bilateral lenders.

Funding structure anchored by global institutions

The financing blueprint reflects a blended structure. Export credit agencies are expected to provide about 60% of total funding, while development finance institutions will contribute 25%. The remaining portion will be raised through the sukuk issuance, targeting investors aligned with Sharia-compliant assets.

Patrick Ocailap, deputy secretary to the treasury, is currently leading a regional roadshow across East Africa, including Kenya and Tanzania, to assess investor appetite and support price discovery ahead of issuance.

The delegation includes representatives from Stanbic Bank Group, the central bank, and the SGR project team, underscoring a coordinated push to restore investor confidence.

From Chinese financing to Western arrangers

Uganda’s renewed financing strategy follows the collapse of earlier talks with Chinese lenders. The government has now appointed Citibank as lead arranger to mobilize approximately $3.19 billion, with parallel discussions involving the World Bank.

The pivot reflects a broader recalibration in African infrastructure financing, where governments are increasingly blending Islamic finance, multilateral funding, and Western capital markets to de-risk large-scale projects.

Strategic rail link for regional trade

The 272-kilometre rail line, contracted to Turkey’s Yapi Merkezi, will connect Kampala to the Kenyan border town of Malaba. It is designed to integrate with Kenya’s SGR line running to Mombasa port, significantly reducing freight costs for the landlocked economy.

Once completed, the corridor is expected to become a critical artery within the East African Railway Master Plan, linking Uganda with Kenya, Rwanda, South Sudan, and the Democratic Republic of Congo.