The European Union (EU) has approved a grant of 21.5 million euros (about Shs 94 billion) for the rehabilitation of the Tororo-Gulu railway line.
The project financing agreement was signed between the EU and the Ugandan government at ministry of Finance offices on Wednesday. Finance minister Matia Kasaija signed on behalf of Ugandan government while EU ambassador, Attilio Pacific signed on behalf of the European Union.
The construction of over 400km railway line that has been non-functional for more than 20 years is expected to start by end of this year and be completed by 2022.
Kasaija said the project will cost an estimated 34.6 million euros (about Shs 150 billion) and that the Government of Uganda will contribute 13.1 million euros (about Shs 57 billion) in counterpart funding for the project which also seeks to expand the line connecting eastern Uganda to the north and then linking into Juba in South Sudan and the Democratic Republic of Congo.
“The Tororo-Gulu metre gauge rehabilitation project is very important for trade facilitation for Uganda as it will open up the northern parts of Uganda and parts of Congo and South Sudan in terms of freight,” Kasaija said.
Kasaija said Ugandan businesses will be able to increase their profit margins after the revival of the railway line because transporting cargo by train is cheaper than by road.
“To move cargo from Mombasa to Kampala by rail is about half of the price by road. In my view, if the rail is well maintained, transporting by rail is much safer,” he said.
Kasaija added that government is taking deliberate moves to revitalise railway and water transport to relieve Uganda's road infrastructure of being used to transport everything.
He added that the decision to fund the rehabilitation works for the railway was informed by a 2016 feasibility study commissioned by the government and EU, saying that the Gulu railway project will be faster than the Standard Gauge Railway project, which government equally envisages putting in place.
Kasaija said that even if Uganda started work on the Standard Gauge Railway today, the first trains between Mombasa to Kampala will not run until after a decade because Kenya has delayed committing construction of its Standard Gauge Railway to the Malaba border.
Pacifici said the revived railway will also help deliver humanitarian assistance more quickly, efficiently and cost-effectively to the more than one million refugees hosted in Uganda northern regions.
“The project will have a spill-over impact on private sector growth and on investment promotion. It will also add value to the key value chains of northern Uganda including agriculture products, cement, oil and gas, mining as well as industrial products in general,” he said.
Pacifici said the lowered transport costs could have a positive impact on the price of goods such as rice, where 60 per cent of the costs are due to the importation prices.
“By reducing the costs for products importation, the project will also have an impact on poverty reduction. For example, logistic costs for rice importation represent as much as 60 per cent of the total value. Therefore, the price of rice can be significantly reduced if transport rates are lowered,” he said.
Pacifici said the Tororo-Gulu railway line used to be a key economic route along the East African northern corridor linking the Kenyan port of Mombasa and eastern Uganda to northern Uganda before it closed in 1993 due to Lord Resistance Army's (LRA) insurgency.
The rehabilitation project will be supervised by the ministry of Works and Transport through the Uganda Railway Corporation (URC).