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Uganda needs Kenya's go-ahead for Sh237 billion China rail cash

By David Malingha Doya | May 31st 2017


Ugandan Finance Minister Matia Kasaija

Uganda, which wants to start building part of a multi-billion-dollar rail line to Kenya, must wait for its neighbour to decide on plans for its portion of the track before the project’s main funder makes money available, Uganda’s finance minister said.

Export-Import Bank of China will arrange financing for Uganda only when it is sure that Kenya “is willing and able to extend its railway to the border, so that they don’t fund a white elephant,” Finance Minister Matia Kasaija said. Kenya has committed to the line, but wants to start building when it is in a position to borrow more money, he said.

Eximbank will provide 85 per cent of the Sh237 billion ($2.3 billion) Uganda needs for the line, Kasingye Kyamugambi, the rail project’s coordinator in Uganda, said in February.

East African nations are trying to direct funds to infrastructure to help accelerate economic growth. The 273-kilometer  standard-gauge line linking landlocked Uganda’s capital, Kampala, to Malaba on the Kenyan border will form part of a network that will eventually span 3,200 kilometers across the two nations, Rwanda, and possibly South Sudan.

China Eximbank in December agreed to lend Kenya Sh505 billion for the second leg of the new railway, linking Naivasha to Malaba. Trial runs on the first phase between the capital, Nairobi, and the port city of Mombasa start next month. The entire line in Kenya will cost Sh1.08 trillion ($10.5 billion).

Tanzania Option

The World Bank estimates that China may fund about 37 per cent of Uganda’s investment programme in the three years that end June 30, 2020. That’s around the time the country expects oil production to begin. Tullow Oil Plc, China National Offshore Oil Corporation and France’s Total SA are jointly developing crude finds estimated at 6.5 billion barrels.

The state estimates that oil companies will spend $8 billion in the country ahead of production that’s scheduled to begin in three years.

If the Kenyan route to the Indian Ocean is delayed, Uganda may develop an alternative track through Tanzania to the same coastline, according to Kasaija.

That would involve Uganda building a standard-gauge track from Kampala to Lake Victoria and a new port, connecting to similar infrastructure on the Tanzanian side, Kasaija said. [Bloomberg] 

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