Uganda set to issue first sovereign sukuk to partly finance $3.16bn Kampala-Malaba railway

Uganda is preparing to issue its first sovereign sukuk as part of efforts to finance the construction of a standard gauge railway (SGR) linking Kampala to the Kenyan border town of Malaba, marking the country’s entry into Islamic capital markets, Ecofin Agency reports.

The Ministry of Finance said on May 12 that proceeds from the sukuk issuance would finance 15% of the estimated €2.7bn ($3.16bn) cost of the SGR. Export credit agencies are expected to provide 60% of the project financing, while development finance institutions would contribute the remaining 25%.

Deputy Treasury Secretary Patrick Ocailap has launched a regional investor roadshow across East African Community (EAC) member states including Kenya and Tanzania ahead of the issuance, though authorities have not yet announced the size or launch date of the sukuk.

Ocailap said the roadshow was intended to “test the market, determine pricing and build investor relationships to ensure the success of the operation,” according to the ministry’s statement posted on X.

The delegation included representatives from Yusra Sukuk, the lead arranger for the transaction, as well as representatives from Stanbic Bank Uganda and the Bank of Uganda.

Uganda originally awarded the railway construction contract in 2015 to China Harbour Engineering Company under an arrangement requiring the contractor to secure financing from the Chinese government.

After years of delays in arranging funding, the Ugandan government cancelled the contract in January 2023. Authorities later signed a new agreement in October 2024 with Turkish construction firm Yapi Merkezi to build the railway linking Kampala and Malaba.

The railway project forms part of a broader regional integration strategy aimed at connecting Uganda to Kenya’s railway network and the Indian Ocean port of Mombasa.

Kenyan President William Ruto in March inaugurated construction works on a new phase of Kenya’s SGR linking Naivasha to Kisumu, with a later extension planned toward the Ugandan border.

Kenya’s SGR has connected Mombasa to Nairobi and onward to Naivasha since 2019.

Over the longer term, Kenya and Uganda aim to extend the rail corridor toward Rwanda, South Sudan and the Democratic Republic of the Congo as part of efforts to strengthen regional trade and logistics integration across East and Central Africa.