January 26, 2017 / 12:42 PM / 7 months ago

Uganda negotiating $2.3 bln loan with China to fund rail line

French TGV trains (high speed train) are parked at a SNCF depot station in Charenton-le-Pont near Paris, France, May 31, 2016.Charles Platiau

KAMPALA (Reuters) - Uganda is negotiating a $2.3 billion loan with China's Exim Bank to fund an initial 273 km stretch of rail line the east African country is planning to build for faster and cheaper transportation, an official said on Thursday.

Landlocked Uganda eventually wants to construct a 1,700 km standard gauge railway network to connect with similar lines being built in neighbouring Kenya.

The rail links are expected to help to boost the volume and efficiency of trade between Kenya's Indian Ocean seaport of Mombasa and its vast hinterland stretching to South Sudan, eastern Democratic Republic of Congo (DRC), Rwanda and Burundi.

"The construction of the eastern route ... will cost $2.3 billion," Standard Gauge Railway project head Kasingye Kyamugambi told Reuters, referring to the 273 km stretch between the capital Kampala and Malaba on the border with Kenya.

"Uganda is negotiating with Exim Bank of China to secure financing for the project and begin construction."

Kyamugambi did not say when a deal is expected to be finalised but said that construction -- slated to start once funds are secured -- will take 42 months.

Once fully completed, the railway will have several arms connecting it to Congo, Rwanda and South Sudan.

Both Uganda and Kenya have been using a decrepit, narrow-gauge railway line built about a century ago by the British. That old line in both countries is being operated by a private investor under a concession that runs until 2032.

In recent years officials in the east African region have been eager to invest in modern transportation and communications links such as railways, expressways and internet cables.

Once complete, the new electric rail network is expected to save Uganda an estimated $2 billion a year through lower freight costs and shorter shipment times.

Kyamugambi said the Ugandan government will contribute 15 percent to the cost of the Malaba-Kampala stretch and also pay for land for the railway corridor.

Last month a Kenyan official said that work on the country's Mombasa-Nairobi stretch of the new railway link, also financed by China, was 98 percent complete and that it would begin commercial operations in January 2018.

Editing by George Obulutsa and David Goodman

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