Parliament Approves Sh168.9 Billion Loan for Solar Irrigation Project

Members of Parliament have given the go-ahead for a substantial loan of up to €168.9 million, intended to finance the second phase of a solar-powered irrigation systems project. This initiative is primarily geared towards enhancing coffee production, a key export for Uganda, and building resilience against climate change impacts.

The loan, approved on June 10, 2026, will enable the installation of solar irrigation systems covering approximately 4,768 acres, expected to directly benefit around 2,562 households. The project’s urgency led to a suspension of parliamentary rules to allow for immediate consideration, as financing terms were set to expire soon after.

Minister of Finance, Henry Musasizi, explained that the funds will support the establishment of 427 solar-powered irrigation systems in coffee-growing regions. This intervention is crucial as prolonged dry seasons currently lead to significant crop losses and affect farmers’ livelihoods. The project seeks to raise coffee yields substantially, from an average of 1.3 kilogrammes per tree to an estimated 6.5 kilogrammes under proper irrigation.

While the project received broad support, some concerns were raised regarding the loan’s interest rates and the process of approval. MP Karim Masaba highlighted that the interest rate from Citi Bank, estimated at 7.5%, appeared high, questioning whether alternative financing options with lower rates were adequately explored. The loan package includes a €148.5 million facility from UKEF at a fixed 3.65% interest rate and a €20.5 million facility from Citi Bank.

Despite these concerns, supporters of the motion emphasized the critical need for borrowing to fund essential development projects like irrigation, given the national budget’s constraints and the increasing impacts of climate change on agriculture. The Minister of Agriculture, Frank Tumwebaze, stressed the changing weather patterns necessitate irrigation, particularly for smallholder farmers who cannot afford independent large-scale systems.

Source: https://www.parliament.go.ug/index.php/news/4458/house-approves-eu1689m-loan-mega-solar-irrigation