Parliament approves €168.9 Million loan for solar irrigation project to boost coffee production

By Our Reporter

Parliament has approved a government request to borrow up to €168.9 million from the United Kingdom Export Finance (UKEF) and Citi Bank to finance Phase II of the Solar Powered Irrigation Systems Project aimed at increasing coffee production and strengthening climate resilience across Uganda.

The loan was approved on Wednesday, June 10, 2026, during a sitting chaired by Speaker Jacob Marksons Oboth. The project is expected to establish solar-powered irrigation systems covering approximately 4,768 acres and directly benefit an estimated 2,562 households engaged in coffee farming.

To facilitate consideration of the loan request, Parliament suspended Rule 162(2), (3), and (4) of its Rules of Procedure, allowing the matter to proceed without scrutiny by the Committee on National Economy and relevant sectoral committees, which are yet to be constituted under the 12th Parliament.

Invoking Rule 8(1), Speaker Oboth defended the decision, citing the urgency of the financing arrangement.

“We do not have the committees; that is a reality of fact, and this loan is as important as water itself,” the Speaker said.

However, the move attracted criticism from some legislators. Kassanda County North MP, Hon. Patrick Nsamba, questioned Parliament’s failure to constitute committees despite commitments to strengthen oversight.

“It’s not sufficient to just tell us that we do not have committees and yet the people who are supposed to do that are available,” Nsamba argued.

The urgency was driven by the financing terms, which are set to expire on June 13, 2026.

Presenting the motion, Minister of Finance, Planning and Economic Development, Hon. Henry Musasizi, said the project would establish 427 solar-powered irrigation systems in coffee-growing areas to help farmers mitigate the effects of prolonged dry spells and climate change.

“Currently, farmers are losing a lot of crops due to prolonged dry seasons and this, in turn, affects their livelihoods,” Musasizi said.

He explained that while the original project design targeted 700 irrigation sites, the number was reduced to 427 to align with available fiscal resources.

Coffee remains Uganda’s leading foreign exchange earner, generating nearly US$1 billion from exports of 6.06 million bags between March 2023 and February 2024. The sector directly supports about 1.8 million Ugandans and remains a critical pillar of the country’s economy.

According to Ministry of Finance statistics, Uganda currently has only 23,595 hectares under irrigation despite an estimated irrigation potential of 3.03 million hectares nationwide.

Government projects that irrigation could significantly increase coffee productivity, with yields rising from an average of 1.3 kilograms of dried cherries per tree to as much as 6.5 kilograms.

The financing package comprises a €148.5 million facility backed by UKEF at a fixed interest rate of 3.65 percent, repayable over 13 years, including a three-year grace period. It also includes a €20.5 million commercial facility from Citi Bank with a seven-year repayment period and an estimated interest rate of 7.5 percent.

Some legislators raised concerns about the cost of borrowing. Mbale Industrial Division MP, Hon. Karim Masaba, argued that the interest rate on the commercial facility was high and that the government had not presented alternative financing options as required by law.

“We have an option at a lower rate than 7.5 percent. We needed to know what options the government had with their interest rates and terms and conditions,” Masaba said, proposing that the loan request be reviewed.

Despite the concerns, several legislators backed the proposal.

Budadiri County East MP, Hon. Julius Muntu, said borrowing was necessary to bridge the country’s financing gap and support critical development interventions such as irrigation.

“Our budget is UGX 84 trillion. UGX 33 trillion is going into debt, leaving UGX 50 trillion for public service. We have a deficit of about UGX 38 trillion, which we have to finance through borrowing,” Muntu said.

Minister of Agriculture, Animal Industry and Fisheries, Hon. Frank Tumwebaze, emphasized that changing weather patterns have made irrigation an urgent necessity for Uganda’s agricultural sector.

“I appeal to you to make an exception and pass a loan that will support smallholder farmers because the 10 to 20-acre farmers are not able to borrow from Uganda Development Bank to invest in large irrigation systems,” Tumwebaze said.

The Minister of Trade, Industry and Cooperatives, Hon. Sanjay Tanna, also supported the proposal, noting that Uganda’s stable inflation environment makes it an appropriate time to access development financing.

Meanwhile, the Leader of the Opposition, Hon. Joel Ssenyonyi, called on government to provide a detailed accountability report on the implementation and outcomes of Phase I of the irrigation project before proceeding further.

The approved loan is expected to strengthen Uganda’s efforts to modernize agriculture, increase coffee production, and build resilience against the growing effects of climate change, particularly among smallholder farmers who form the backbone of the country’s agricultural sector.