EBRD and partners put Moldovan railway on track for change

The EBRD finance will also support a broader reform of the railway sector to improve safety and efficiency

In a major step towards the modernisation of Moldova’s railways the EBRD is providing €52.5 million to the state-owned railway company, Calea Ferată din Moldova.

The loan, signed by Moldova’s Prime Minister Iurie Leancă and EBRD Director for Transport, Sue Barrett, in Chișinău today, will be used to co-finance the acquisition of around 10 new multi-purpose locomotives and the rehabilitation of rail infrastructure. The European Union is co-financing the purchase of the locomotives with a €5 million investment grant through its Neighbourhood Investment Facility (NIF).

The EBRD finance will also support a broader reform of the railway sector to improve safety and efficiency. Action plans to restructure the railway sector and to strengthen the institutional capacities in the key areas of environment, procurement and corporate governance will be developed with the EBRD. The Bank will also support improvements of the company’s energy management to cut consumption and costs.

Moldova’s railway sector is in urgent need of fundamental restructuring to provide adequate services and compete with other means of transport. Its life-expired rolling stock fleet is in serious need of renewal. The company has therefore launched a far-reaching modernisation project with €116.75 million in new investments.

In addition to the EBRD’s €52.5 million loan, the European Investment Bank is expected to provide a parallel loan of a similar size to support this programme.

Further to the EU’s investment grant, further grant financing worth €1.75 million will be provided by the EBRD’s own funds, the Central European Initiative and the Czech government. The funds will be used to improve the company’s management in specific areas and to strengthen its corporate governance.

Sue Barrett, EBRD Director for Transport said at the signing ceremony: “The Moldovan railway sector is in urgent need of fundamental restructuring in order to be financially viable, to provide adequate railway services and to be able to compete with other modes of transport. The EBRD is teaming up with the EIB, the EU and development partners to support this restructuring. Better, safer and more efficient rail transport services require comprehensive reforms and our joint investment, grant financing and technical advice will significantly contribute to this effort.”

The EBRD’s loan comes in two tranches, where the second tranche of €27.5 million will be subject to the achievement of key milestones financed by the first tranche including grant financing.

The EBRD is the largest institutional investor in Moldova. The Bank focuses on supporting private sector activity, promoting European standards and regional integration and developing efficient and sustainable public utilities. To date, the EBRD has invested some €900 million in over 100 projects.