By Staff Writer | The Exchange

Children walk by the rails at an elevated section of the new Standard Gauge Railway (SGR) | Getty Images

Uganda’s finance minister has said the country cannot go kick start its project part of the multi-billion-dollar railway line to Kenya until their neighbour has given them the green light. Uganda must await the decision by the government of Kenya to make the funds available for the project to take off.

Export-Import Bank of China will arrange to finance for Uganda only when it’s 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’s in a position to borrow more money, he said.

Eximbank will provide 85 percent of the $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 (170-mile) 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 $4.9 billion for the second leg of the new railway, linking the southern Kenyan town of 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 $10.5 billion.

 

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The World Bank estimates that China may FUND about 37 percent of Uganda’s investment program in the three years that end in June 2020. That’s the time the country expects crude oil production to begin.

Tanzania Option

If the Kenyan route to the Indian Ocean is delayed, Uganda may decide to develop an alternative track through Tanzania to the same coastline, according to Kasaija, who spoke in an interview Tuesday in Nigeria’s capital, Abuja.

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. German lender KfW will fund the harbour’s construction, he said.

“Uganda has a choice to go with whoever gives us a quick answer to our aspirations,” Kasaija said. “We plan to ultimately develop both.”

The country is increasingly borrowing to fund its infrastructure projects, which may raise public debt to 44 percent of gross domestic product in 2020-21, from 35 percent in 2015-16, the International Monetary Fund said in March.