The IFC -- the World Bank's investment arm -- which had disbursed part of a $44 million loan for the restructuring of Tanzania Railways Limited (TRL), withdrew from the project after the privatisation process stalled.
Rites -- with a 51 percent in TRL, has already signed a deal with the government to sell its stake in the joint venture, Transport Minister Omari Nundu told a parliamentary committee.
Zibusiso Sibanda, spokesman of IFC's infrastructure investment advisory department said that IFC had disbursed $14 million to TRL in 2008, but the company had repaid $7 million in 2010 and the remainder last week.
"The undisbursed loan of $30 million was cancelled through a mutual agreement with TRL in October 2010, and the remaining $7 million was settled with the government last week," Sibanda said in an e-mailed response to questions submitted by Reuters.
"As the private sector arm of the World Bank Group, IFC would be willing to consider supporting a re- privatisation of the railway based on a commercially sound business plan and financing plan."
Tanzania said in June it would invite fresh bids for a stake in its railway company after the termination of a concession deal with Rites Ltd before the end of next year.
TRL was established in 2007 as part of a 25-year concession deal to improve the country's main railway network. The government retained a 49 percent stake.
But the privatisation deal failed to revive the network, with the company frequently hit by financial difficulty, deteriorating service, and workers' strikes over salary delays.
Since its privatisation, the railway's passenger traffic fell 46 percent last year, while the annual cargo haul also fell 43 percent to 256,190 tonnes from the previous year.
Sibanda said termination of the privatisation deal was the result of a mutual agreement between the Tanzanian government, Rites and IFC.
"Rites' shares in TRL (51 percent) were pledged to IFC as part of the security of the IFC loan. When we had the settlement of the remaining $7 million with the government, the share pledge was assigned to the government. The government has already acquired Rites' shares in TRL for renationalisation," he said.
The IFC advised the Tanzanian government to make "incremental improvements" to the 2,700-kilometre railway while maintaining operational safety, pending a fresh privatization process.
The government said it plans to spend 2 trillion shillings over the next five years to upgrade the railway line to standard gauge from the current narrow network. Reuters
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