The Project consists of road improvements on three selected sections (58 km) of the Northern Road Corridor including two bypasses for the cities of Kampala and Mbarara (Uganda). The direct purpose of the project is to alleviate transport bottlenecks, generate savings in vehicle operating costs and travel time as well as to reduce the level of road accidents. The modernisation of this transport infrastructure is crucial for both national and regional road traffic and sustains economic growth in the area, trade expansion and investment, which are also vital to develop and support a dynamic and robust private sector.
Uganda is a HIPC country and is therefore largely constrained to borrow on highly concessional terms. The EU-AITF Interest Rate Subsidy is used to lower the final interest rate of EIB’s loan of EUR 55 million to the Government, providing the 35% IMF concessional element required in the case of Uganda for additional official development finance. The loan to the Government is passed on to the promoter, the Ugandan National Roads Authority (UNRA), in the form of a grant.