Uganda has signed a €2.7 billion ($2.95 billion) deal with Turkish construction firm Yapi Merkezi Holdings AS to build a 272-kilometer railway line, reviving a long-stalled project after China withdrew its financial support.
The railway will connect Uganda’s capital, Kampala, to the Kenyan border, a key route in the country’s efforts to improve access to the port of Mombasa.
The initial plan envisioned a standard gauge railway (SGR) stretching all the way to the Indian Ocean, enhancing Uganda’s connectivity to the region.
Uganda has now turned to Citibank as the lead arranger for syndicated debt financing. Officials expect construction of the fully electrified railway, designed to run at speeds of up to 120 km/h, to be completed within four years.
“This is the first phase of a broader plan that targets over 1,700 kilometers of standard gauge railway across Uganda,” said Perez Wamburu, the project coordinator.
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Yapi Merkezi was awarded the contract after China Harbour Engineering Co. failed to deliver on an earlier agreement to build the line, which was expected to cost $2.3 billion.
Yapi Merkezi initially submitted a bid of €3.4 billion, but negotiations brought the final cost down to €2.7 billion.
In Uganda’s current fiscal year budget, the government plans to secure Ush.2.2 trillion ($600 million) in external loans to support the project’s development.
Transport Challenges
Uganda’s existing rail link with Kenya was left incomplete after China halted funding, leaving the country to rely on road transport for much of its trade through the port of Mombasa.
The existing meter-gauge railway connecting Kampala to Malaba, near the Kenyan border, is undergoing rehabilitation, but the new standard gauge line is expected to significantly reduce transport costs.
“The new railway will cut cargo transport costs by half,” said **Ramathan Ggoobi**, Permanent Secretary in the Ministry of Finance, during the signing ceremony in Kampala.
