KAMPALA — China’s soft loans to Uganda have reached $2.5 billion, a signal of the two countries deepening relations, a Chinese envoy said.

Zhao Yali, Chinese ambassador to Uganda said most of the loans are funding key infrastructure projects which are critical in boosting the country’s economic and social development.

Zhao was speaking late on Oct 1 at a reception marking the 66th anniversary of the founding of the People’s Republic of China.

China is funding the construction of Karuma and Isimba Hydro Power Stations, the Standard Gauge Railway and the expansion of the country’s international airport among other projects.

Zhao told the gathering also attended by Uganda’s President Yoweri Museveni that China’s investment in Uganda has reached $1.1 billion.

Major investments are in Uganda’s oil sector where China National Offshore Oil Corporation has a stake.

Zhao also said the bilateral trade has reached $377 million, an increase of 23.2 percent over the same period last year.

Museveni said China has extended a lot of financial support to Africa especially in key areas that will fast track the continent’s economic development.

While speaking at the UN on Sept 26 Chinese President Xi Jinping announced a new development assistance fund for the least developed countries with an initial investment of $2 billion that could grow to at least $12 billion by 2030.

African countries through the South to South cooperation are set to benefit from the fund to lift millions of its people out of poverty.

China also pledged to exempt the debt of the outstanding intergovernmental interest-free loans due by the end of 2015 owed by the relevant Less Developed Countries, landlocked developing countries and small island developing countries.