The Tanzanian government has signed a facility agreement with Standard Chartered for a US$1.46bn term loan to fund part of the construction of the country’s latest mega-project, the Standard Gauge Railway (SGR).

The deal, which the country’s ministry of finance says is the largest foreign currency financing it has raised to date, comprises an export credit agency (ECA) covered facility of US$990mn from the Swedish and Danish ECAs, a development finance institution (DFI) tranche of US$200mn from the Development Bank of Southern Africa (DBSA), the Trade and Development Bank (TDB) and the African Export-Import Bank (Afreximbank), and a commercial bank tranche of US$270mn. Standard Chartered Tanzania acted as global co-ordinator, bookrunner and mandated lead arranger.

The funds will be used to cover the construction of a 550-kilometre section of the railway between Dar es Salaam and Makutupora. Swedish-Swiss multinational corporation ABB has been selected to supply substation equipment and engineering solutions along the high-speed line, while building works are being carried out by Turkish contractor Yapi Merkezi in partnership with Portugal-based Mota-Engil.

Once fully completed, Tanzania’s SGR line will stretch for a further 1,000 kilometres to the shores of Lake Victoria, connecting the landlocked countries of Burundi, Rwanda and DRC to the port of Dar es Salaam.

Speaking at the signing of the deal, Philip Mpango, Tanzania’s minister of finance and planning, called for further financing support to complete the project, the total cost of which is estimated at around US$7.5bn. “These infrastructure projects require substantial amounts of financial resources,” he said. “Standard Chartered and other lenders who participated in this transaction have proven the value of partnership in development and I encourage others to follow this example to close Tanzania’s huge infrastructure gap so that we are not left behind.”

The country has struggled to obtain the finance it requires to complete the ambitious project, with questions raised about its feasibility. In 2013, a World Bank report concluded that there was “no economic or financial case for standard gauge”, calling instead for a refurbishment of the colonial-era metre gauge network.

Input from broking firm Marsh, which provided an innovative US$95mn unfunded surety structure to guarantee Yapi Merkezi’s contractual performance-related obligations and the repayment of advance payments, enabled two local Tanzanian banks to issue large guarantees backed by the African Trade Insurance Agency (ATI), allowing construction on the first phase of the project, from Dar es Salaam to Morogoro, to begin. However, the selection of the Turkish-Portuguese consortium over Chinese contractors meant plans for China’s Exim Bank to provide most of the funding fell through, and it remains to be seen as to whether the country will succeed in attracting enough finance to finish the job.