21 May 2017

Tanzania Struggles to Finance Standard Gauge Railway

Photo: Daily News
President John Magufuli inspects a section of the Standard Gauge Railway project after laying the foundation stone at Pugu Station on the outskirts of Dar es Salaam last week.

Tanzania is struggling to find financiers for its proposed $1.2 billion standard gauge railway as leaders continue to raise questions on the viability of the project.

A group of MPs recently said the project is likely to stall due to lack of financing unless the government considers alternative sources of funds outside low-interest loans such as a 15-year railway bond.

President John Magufuli has in the past few months been lobbying heads of state and international financial institutions to help his government raise money.

Last week, he asked his South African counterpart Jacob Zuma who was visiting Dar es Salaam to help Tanzania secure low-interest loans from the Brics Development Bank. Brics is an association of emerging economies, Brazil Russia, India, China and South Africa.

"I have asked President Jacob Zuma to help us secure a low interest loan from Brics to finance particularly the SGR project," President Magufuli said.

The 1,200km railway line, which is expected to handle 17 million tonnes of cargo per annum, will be built parallel to the existing central railway and the government believes that its completion will increase trade volumes between the country and its landlocked neighbours.

However, it is unclear whether Brics will agree to finance the project. A Chinese company awarded the contract to build the railway by the Jakaya Kikwete government had its contract suspended by President Magufuli over alleged irregularities in the tendering process.

President Magufuli also asked the World Bank Group president Dr Jim Yong Kim who visited Tanzania in March for money to finance the project. The World Bank has already set aside $200 million for the rehabilitation of the central railway.

"The World Bank has in the past said that SGR is not viable in the region. The government had been hesitating to use the $200 million to rehabilitate the central railway and it is clear that the World Bank can't agree to have the money diverted to SGR," a source with knowledge of the project told The EastAfrican.

However, the government says it will use own domestic resources to build the first phase of the project consisting 300km and costing $ 1.2 billion and that the government had already provided $1.22 million for the start of the construction of the first phase in the 2016/2017 budget allocations.

However, budget records indicate that the government had only disbursed Tshs290 billion ($129 million) until March this year. The budget estimates for 2017/18 show that the government has only allocated Tshs290bn for the project.

The first phase of the project will run from Dar es Salaam to Morogoro and will involve a dry port project and six stations.

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