Work Bank Approves Additional Funds for Energy Project in Tanzania

June 7, 2011

WASHINGTON, June 7, 2011—The World Bank’s Board of Executive Directors today approved an additional International Development Association (IDA) credit of US$27.88 million to support Tanzania’s Energy Development and Access Expansion Project (TEDAP).

This adds to an original IDA credit of US$105 million and a Global Environment Facility grant of US$6.5 million approved for this project in December 2007. It also follows a previous additional financing of US$25 million approved last year primarily to support the project’s small renewal energy component.

TEDAP became effective in March 2008 in the aftermath of the most serious energy crisis in the country and aims at improving the quality and efficiency of electricity service provision in the three main growth centers of Dar es Salaam, Arusha, and Kilimanjaro, and to establish a sustainable basis for energy access expansion and renewable energy development in Tanzania.

The project also contributes to the global environmental objective to abate greenhouse gas emissions through the use of renewable energy in rural areas to provide electricity.

“Despite advances, access to electricity in Tanzania remains a serious infrastructural shortcoming, which hurts economic growth and industrial development,” said John Murray McIntire, the World Bank’s Country Director for Tanzania, Uganda, and Burundi. “We are confident that the additional resources provided by the World Bank will be used to enhance the operational efficiency of the electricity distribution system and increase access to electricity in the country,” he added.

The current additional financing would support cost overruns related to adding, replacing or upgrading transmission and distribution lines and substations and medium and low voltage equipment, meters, spare parts and tools. In addition, it would finance an additional capacity-building measure under the project, which relates to TANESCO’s Environmental unit and foresees strengthening of the utility’s capacity for environmental management. This capacity building measure will support continuing activities related to the environmental management aspects in the context of the Lower Kihansi Environmental Management Project (LKEMP), which closes on June 30, 2011.

The Government has reiterated the importance of the TEDAP project for the energy sector in Tanzania, which suffers from a chronic shortage of power supply during the dry season that is aggravated by high transmission and distribution losses. The World Bank’s Africa Infrastructure Diagnostic study estimates that load shedding and emergency generation cost Tanzania over five percent of the GDP annually. In addition, studies show that inadequate power supplies take a heavy toll on the private sector. Such outages represent high costs for enterprises; six percent of turnover on average for formal enterprises, and as much as 16 percent of turnover for informal enterprises.

In total, the World Bank’s currently active country portfolio includes 25 operations with a net commitment of US$2,660.8 million. The largest share of resources is allocated to transport (17 percent) followed by urban development (13 percent). In addition, Tanzania benefits from 11 regional projects, in which Tanzania-specific financing amounts to over US$230 million.

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