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Uganda’s €3 Billion Railway Bet: Can Debt-Financed Infrastructure Deliver Growth?

  • Writer: Derry Thornalley
    Derry Thornalley
  • Aug 21
  • 3 min read

Updated: Sep 11

Uganda has just taken a bold step that could reshape its economic future. Earlier this week, officials confirmed that the country is in advanced negotiations to finance 85% of a planned €2.7 billion railway project—a line awarded to Turkish construction giant Yapi Merkezi.


At first glance, it’s another big-ticket infrastructure announcement. But if we look closer, this project reveals the delicate balancing act Uganda faces: unlocking growth through connectivity while carrying the weight of rising public debt.


The Project at the Centre of It All

The railway in question is designed to connect Uganda more efficiently to regional trade corridors, providing a faster and more reliable link for goods moving between East Africa’s inland economies and the coast. For a landlocked country like Uganda, this is about more than just transport—it’s about competitiveness, industrialisation, and the ability to plug into Africa’s wider trade agenda under AfCFTA.


Yapi Merkezi, the Turkish firm leading the project, is no stranger to East Africa. It’s the same company behind Tanzania’s electrified Standard Gauge Railway, a project that has already transformed freight capacity across that country.


If Uganda can pull this off, it could do the same for Kampala and beyond.


Overlooking Kampala City

Where the Money Comes From

Infrastructure dreams mean little without financing, and this is where the story gets interesting. Uganda is seeking to cover 85% of the project cost through debt—with talks underway involving the African Development Bank (AfDB), the OPEC Fund for International Development, the Islamic Development Bank, and a handful of European export credit agencies.


The government is expected to put up the remaining 15%. On paper, this looks like a manageable structure. In reality, it adds to Uganda’s already sizeable public debt burden, which has been rising steadily over the past decade.


The question investors are asking is simple: Can Uganda service new debt while still delivering the growth this railway promises?


The Bigger Picture

This deal is not happening in isolation. Across Africa, governments are grappling with the same dilemma: how to build while borrowing responsibly.


On the one hand, debt-financed infrastructure can catalyse growth by unlocking trade, creating jobs, and stimulating domestic industries. On the other hand, excessive debt—especially in foreign currency—can trap countries in cycles of repayment and fiscal pressure.


Uganda is betting that the economic returns from this railway will outweigh the risks. It’s a calculated gamble, but one that mirrors choices being made from Nairobi to Accra.


Why It Matters

For Uganda’s people, this isn’t about debt-to-GDP ratios or credit ratings. It’s about whether goods move faster, whether jobs materialise, and whether small businesses in places like Jinja or Gulu can connect more easily with regional markets.


For global financiers, it’s a test of Uganda’s capacity to execute large-scale infrastructure responsibly. And for the wider region, it’s part of a bigger story: East Africa’s push to build modern transport networks that knit the continent together.


My Take

Uganda’s €3 billion railway project is bold. It’s risky. Is it necessary?


If managed well, this line could become one of the most transformative infrastructure projects in the country’s history, boosting trade and anchoring Uganda more firmly in regional value chains. But if debt pressures aren’t balanced carefully, it could also add strain at a time when global borrowing costs remain high.


As always, the truth lies in execution. For now, Uganda has signalled its intent: it is ready to bet big on infrastructure to fuel the future.

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