FINANCE MINISTER PLEAS FOR POST-FLOOD RAIL/ROAD REPAIR

UNCLAS SECTION 01 OF 02 DAR ES SALAAM 000140 SIPDIS SENSITIVE DEPT FOR CA/OCS, AF/E JTREADWELL TUNIS FOR ADB REP STATE PASS AID AFR/SD, USTR FOR WILLIAM JACKSON, USTDA FOR KATHRYN DORMINEY E.O. 12958: N/A TAGS: EAID ELTN ECON TZ SUBJECT: FINANCE MINISTER PLEAS FOR POST-FLOOD RAIL/ROAD REPAIR ASSISTANCE REF: A: DAR ES SALAAM 17 B: DAR ES SALAAM 38 C: 2009 DAR ES SALAAM 844 D: DAR ES SALAAM 80 DAR ES SAL 00000140 001.2 OF 002 (U) 1. SUMMARY: Minister of Finance Mkulo convened Chiefs of Mission from donor countries February 10 to request emergency funding of approximately USD 22 million to restore railway and road infrastructure destroyed by recent flooding. The flooding occurred primarily in Morogoro region, following heavy rains in December and January. The Minister's main concern is the destruction of major sections of the Central Line railway, disrupting the transport of goods between Dar es Salaam port and western Tanzania, Burundi, Rwanda and eastern Democratic Republic of Congo. The assembled COMs expressed concern about the budget for rail repairs (at USD 12m likely an underestimate) and addressing short-term versus long-term transportation needs. END SUMMARY. (U) 2. Following the Morogoro floods, the GoT initially assessed that its domestic contingency budget would suffice for infrastructure repairs and humanitarian needs. However, a more recent assessment by experts from Tanzania Railways Limited and the Ministry of Infrastructure Development found the damage to be far greater than expected, resulting in this emergency funding request. (Note: We worked with USAID/OFDA/Nairobi to make a formal disaster declaration on January 13, providing USD 50,000 to the Tanzanian Red Cross to provide humanitarian assistance to some of the 40,000 persons affected by the floods (ref a). End Note.) (U) 3. Mkulo noted that this has been a particularly difficult budget year for Tanzania, coping with revenue shortfalls due to the global economic downturn (estimated at USD 200 million) and dealing with several disasters, including severe drought - requiring food aid to more than 40 districts - and the Zanzibar power crisis (ref b). The Minister acknowledged that due to budget constraints the 2009/10 infrastructure budget was cut back considerably and covered only a small number of projects. Although the GoT has long-term plans to completely refurbish the century-old Central Line, there is debate as to the most cost-effective way to accomplish this (see ref c). Funding requirements would be substantial. The World Bank is undertaking a Transport Sector assessment that will provide more information on how to refurbish the rail system. One of the diplomats present recommended that the Minister approach the East African Community for potential funding to restore the rail service, given its importance as a connection to member states Rwanda and Burundi (see ref d). (U) 4. COMs raised concerns about the possibility of restoring the railway in the short term, given the extent of damage shown in the report and the pending "long rains" (generally March to May). Additionally, several COMs stated that the budget estimate seemed far lower than that required to fix the railway, due to the severe erosion and complete destruction of parts of the railway track. (U) 5. Mkulo proposed the following next steps: -- a team of engineers and other experts will evaluate the plans and the budget to restore the roads and railway line; -- a site visit will be arranged on February 27 for COMs to see firsthand the extent of the damage and to get a report on the revised budget and plans for restoration; -- the GOT will make a formal request for assistance to the donor community. (U) 6. The COMs attending the meeting made no specific funding commitments. The World Bank and the EU indicated that they would consider ways to restore the railway line with a long-term view of developing the rail system. The African Development Bank indicated that it could provide up to USD 1 million for humanitarian assistance. (U) 7. The Resident Country Director of the Millennium Challenge Corporation (MCC) subsequently reported on a meeting of Tanzanian transport sector donors. The EU has up to USD 10 million (7.7 DAR ES SAL 00000140 002.2 OF 002 million euros) in funds that are available for support for assistance with natural disasters and other emergencies. The EU is "positively considering" using a portion of these funds to provide relieve to Kilosa. A World Bank transportation sector representative indicated that the World Bank office in Dar es Salaam was advocating use of a similar World Bank fund of up to TZS 30 billion (USD 23 million) to provide similar assistance. The World Bank was still discussing modalities internally, i.e. grant, concessional loan, or other arrangement, but it appeared likely that the Bank would provide a significant amount of the funding requested. (SBU) 8. COMMENT: Although the impact of disrupted rail transit is real, the GoT's initial response reflects a common tendency to seek donor support reflexively before considering the problem fully. The GoT did not provide an analysis of the cost of fixing the rails as compared to the economic losses or impact to the Dar-Dodoma road of altering the mode of freight transport. The long-neglected Tanzania rail system accounts for only seven percent of goods moved through Dar es Salaam port. Similarly, the GOT was not prepared to discuss the relationship between an "emergency" repair and proposals for substantial repairs and upgrading to the entire rail system. (SBU) 9. COMMENT, cont: Minister Mkulo opened the meeting by saying that President Kikwete had asked him to convene the donors. It was noted that the area most affected by flooding is Mkulo's parliamentary constituency of Kilosa. LENHARDT