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Uganda looks to US$8 billion in Chinese financing to fund new railway

UGANDA hopes to secure an US$8 billion loan from China to build a new railway network and upgrade its national transport infrastructure ahead of expected oil production output three years from now.

Ugandan lack of maintenance of tracks and rolling stock has left the existing line in a dilapidated state, and much of the freight from Mombasa is trucked in. Uganda wants China to finance infrastructure and be paid back later in oil money.

Uganda plans to start pumping its crude, estimated at 6.5 billion barrels in reserves in 2017 and requires rail transport to move drilling gear.

China has become a major investor in Uganda as it has in other parts of Africa, putting money into roads, hydro electric dams, fibre optic cabling and other infrastructure projects though soft loans.

"This is a huge project and weˇll need cheap money and I donˇt think we can get it from anywhere else," Keith Muhakanizi, permanent secretary, ministry of finance, told Reuters. "We hope China will agree to fund the railway project. Negotiations start soon."

China Harbour Engineering Corporation (CHEC) signed a memorandum of understanding in August to start a feasibility study on the new project.

East African leaders and China signed multi-billion dollar agreements in May to build standard gauge railway from Mombasa to Nairobi and on into neighbouring states, including Uganda.

Uganda hopes China will finance line from the Kenyan border to Kampala, then to South Sudan linking it to the oil-rich West Nile that borders on Democratic Republic of Congo.