The UK’s export credit agency (ECA) is backing €422mn in loans for infrastructure upgrades in Zanzibar, in a move it says will open up millions of pounds worth of export opportunities for the UK’s construction sector.

The financing, signed with Tanzania’s finance and planning ministry, is made up of two facilities.

A €180mn deal arranged through Citi will support the expansion and modernisation of Pemba Airport – the smaller of two airports on the Zanzibar archipelago – to substantially increase passenger capacity and enable it to receive international flights. Works include a runway extension, new terminal buildings and other new infrastructure including a control tower.

Currently, only Abeid Amani Karume airport, located on the main island of Unguja, can accommodate large aircraft. In a statement, UK Export Finance (UKEF) says that the new project will “unlock the economic potential” of Pemba by allowing overseas passengers to reach it directly.

The €180mn is made up of a mixture of lending from Citi which is enabled by a UKEF buyer credit loan guarantee, and direct lending from UKEF issued through Citi, and includes the premium charged by UKEF.

The second facility is a €242mn deal arranged through Deutsche Bank to improve a total of 103km of road infrastructure in Zanzibar, both to reduce congestion as well as support greater connectivity across Pemba and Unguja. Like the Citi deal, it is also structured as a combination of lending from Deutsche Bank backed by a UKEF buyer credit loan guarantee, and direct lending from UKEF.

Both projects are being carried out through a joint venture between international infrastructure and construction firm Propav and Mwananchi Engineering Contracting Company, a local company.

As well as boosting Zanzibar’s island economy, which draws around a quarter of its annual GDP from tourism, UKEF says the terms of its support mean the two projects will lead to over £100mn in supply contracts for UK companies. Overall, the ECA has a total risk appetite of up to £2bn with which it can support buyers in Tanzania interested in UK exports. Last year, UK exports to Tanzania reached just £275mn.

“Good local infrastructure is key to encouraging businesses to invest and work with local suppliers,” says Nigel Huddleston, the UK’s minister for international trade. “This deal will support crucial development across Zanzibar, unlock new opportunities for UK companies in Africa, and grow sectors that will create jobs and boost the economy across our nations.”