The facility has been described as largest ever loan for investment in Malawi.
Of the 139 million euros or K113 billion, 120 million euros (approximately, K 97.3 billion) is earmarked for rehabilitation works for the Kamuzu International Airport Turn Off to Mzimba Junction sections of the M1 road, 15.5 million euros (about K12.6 billion) is an additional financing the rehabilitate the Kacheche to Chiweta section of the M1 in Rumphi district while 4 million euros (about K3.2 billion) is for a Technical Assistance Agreement for project implementation support to the Road Authority and Roads Fund Administration.
The rehabilitation works are expected to start from Kamuzu International Airport (KIA) Junction via Kasungu, then from Kasungu to Jenda, then from Jenda to Mzimba Junction and finally from Kacheche in to Chiweta in Rumphi district.
Currently, the M1 road is in dilapidated state and is considered as a death trap to motorists.
The rehabilitation works aim to reduce transport costs, cut travel time and facilitate export.
The M1 upgrade is also expected to improve international links to Zambia and enhance access to Dar es Salaam as part of the north-south regional transport corridor, according to Minister of Finance, Economic Planning and Development who signed the facility on behalf of Malawi government at Capital Hill, through a televised signing ceremony.
“By upgrading the road to modern standards, significant improvements in safety for road users are also an expected outcome of the project,” Mwanamvekha said.
Mwanamvekha-who is apparently winning donor confidence since assuming office in June this year- said the road project is crucial for the country because of its high economic importance for national and regional economies.
He said the M1 road provides an important international corridor between Malawi and neighbouring countries.
Said Mwanamvekha: “The bulk of our exports and imports are moved through this corridor. Unfortunately, the road corridor outlived its economic life and had deteriorated overtime. It has been leading to high maintenance and operating costs for users and this had made goods very uncompetitive due to high transport costs.
“As a country we cannot afford to just wait and see, therefore the loan from EIB and the Grant from the EU have come at the right time and will go along way is helping us improve this road corridor.”
According tom the minister, improving road links is crucial for the sustainable economic development of Malawi and the SADC region.
Apart from the direct benefits arising from the improved road condition, Mwanamvekha said the Project will generate a lot of economic benefits through job creation for the people employed to work on the road, the Project will also create demand for various goods and services like construction materials, mining and accommodation just to mention a few.
Speaking at the event, EU ambassador to Malawi Sandra Paesen said upgrading the M1 road will accelerate economic development across the country and provide new opportunities for agriculture.
She said: “We are pleased to provide 43 million euros of grant financing, through the EU Africa Investment Platform, for the project alongside national, European and international partners. This project will serve to enhance Malawi’s connectivity, boost regional trade and ease the movement of goods and people along this north-south corridor, ”.
She said the EU funds will be provided through blending operation whereby EU grant funds are blended with loans from financial institutions.
The EIB loan, represents our largest ever single engagement in Malawi since the start of its operations in 1977.
Over the last 40 years, EIB has helped to improve water supply, agriculture, aviation safety and energy across Malawi.
From the support, a 4 million euros (about K3.2 billion) of the EU grant funding is earmarked for the technical assistance, to support road construction and monitoring once construction is complete.
EIB is the long-term lending institution of the European Union owned by its Member States.
It makes long-term finance available for sound investment in order to contribute towards EU policy goals.