Malawi gets K44 billion from EU Investment Bank for M1 rehab

Gwengwe and European Investment Bank Vice President

The European investment bank (EIB) and European Union (EU) has given a K44 billion (EUR 43 million) grant to Malawi towards the rehabilitation of the M1 road.

The grant will be combined with a 95 million Euros loan that Malawi obtained from the EIB from its African Investment Platform (AIP) under the Blending Instrument, whereby EU grants are combined with non-grant resources such as loans.

The bank has provided a EUR 95.5 million 20-year loan complemented by a European Union EUR 43.1 million grant, for the road upgrade programme representing its largest ever single engagement in Malawi since the start of operations in 1977.

Once complete, the 347 kilometre road is expected to reduce transport costs, cut travel time and facilitate agricultural exports from rural communities and to ensure a better international connection of Malawi to its neighbouring countries.

With the current dilapidated state of the road, there are expectations the investment will lead to improved road safety by upgrading it to modern standards and will reduce transport costs, cut travel time and facilitate exports.

Speaking during a signing ceremony in Lilongwe, the Bank’s Vice President Thomas Östros said the support for upgrading Malawi’s principal road will unlock economic and social benefits both in this country and the wider region.

EIB
Finance Minister Sosten Gwengwe captured with the EU delegation

“The EIB is pleased to work with Malawian partners, the European Union and World Bank on this truly transformational project that will cut transport costs and reduce delays and make it easier to export agricultural produce from Malawi to ports and neighbouring countries”.

The Brussels based organisation is working with partner countries in the region to strengthen these links through the EU’s Global Gateway, a new European strategy to boost smart, clean and secure links in digital, energy and transport sectors and to strengthen health, education and research systems across the world.

EU Head of delegation Rune Skinnebach disclosed that in collaboration with its member states, it is doing a lot in terms of investment and have joined forces under the Team Europe Initiative to deliver in the areas of Green Growth and Good governance.

 “As we all know, Malawi depends on international trade linkages with neighbouring countries. Poor road conditions present a serious barrier to international trade, local business development and Malawi’s overall economic growth.

“Poor road safety also impacts directly on Malawi’s citizens. If we are to realise positive change in Malawi in terms of jobs and inclusive growth, then we have to really improve the transport linkages. The ambition is to start turning Malawi from a land-locked to a landlinked country,” said Skinnebach.

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A stretch of the M1 road 

Finance Minister Sosten Gwengwe described the road as crucial for Malawi considering the need to improve trade and transport across the country and to neighbouring countries.

He indicated the road is also the main transport route for our agricultural exports and import from regional ports.

Transport and Public Works Minister Jacob Hara observed that improving road links is crucial for the sustainable economic development of the country and the SADC region, as the M1 road forms part of the north-south corridor linking Malawi and other countries in the region to the port of Dar es Salaam.

“Once work to upgrade the M001 road is complete, farmers in rural districts will benefit from improved access to local markets, and our country will have easier access to international markets.

“Over the last 40 years, the European Investment Bank has helped to improve water supply, agriculture, aviation safety and energy across Malawi and the close cooperation between the EIB and Malawi has made the signature of the largest ever EIB loan for investment in Malawi possible today,” said Hara.

EIB
Gwengwe and the EIB Vice President Thomas Östros putting pen to paper. Pics courtesy of EU in Malawi

The Malawi Government will contribute EUR 20 million in addition to the tax exemptions applicable under the Cotonou Partnership Agreement of the ACP-EU.

Some EUR 4.5 million of the EU grant funding is earmarked for the technical assistance, to support road construction and monitoring once construction is complete.

Financing for the Karonga-Songwe section of the M1 road project was provided by the World Bank.

The road upgrade program whose construction is expected to be completed by July 2024 will be implemented by the Roads Authority, under the supervision of the Ministry of Transport and Public Works.