European Bank for Reconstruction and Development (EBRD) investment will boost capacity on the Central Corridor between China and the EU.
The European Bank for Reconstruction and Development (EBRD) has announced KZT 50bn (€100m) of investment in a Kazakhstan railway bond to boost the sector’s resilience and modernise its freight capacity.
The EBRD is investing €100m to help Kazakhstan’s state-owned railway operator (KTZ) restructure its balance sheet and implement the reorganisation of its transit freight operations. The investment is needed to adapt to the after-effects of the pandemic and ongoing geopolitical turmoil.
KTZ, which owns and operates a 16,000-kilometre railway network and manages more than 1,720 locomotives and 46,200 freight cars, will use the new capital to modernise key infrastructure along the Middle Corridor for rail container transit.
This is the EBRD’s first ever investment in a local currency bond in Kazakhstan and the first issue of a bond with TONIA-linked coupon by a local company.
Until recently, up to 95% of freight traffic between China and the European Union travelled through the Northern Corridor. As international carriers are increasingly looking for alternatives to Nothern Corridor, demand for transport through the Middle Corridor, which links Kazakhstan to Azerbaijan, Georgia and Turkey through the Caspian Sea, has increased significantly. Its development is of primary importance to the sustainability of regional trade.
EBRD head of Kazakhstan, Huseyin Ozhan, said: “By investing in the local bond issue of Kazakhstan Railways, the EBRD is improving the sustainability of a major domestic company. It is also contributing to better regional and international connectivity and trade security, as the Middle Corridor offers one of the few realistic alternatives for China-Europe rail freight transportation.”
It is expected that local investors will frequently use TONIA-linked bonds as an effective hedging tool against inflation. They will also contribute to the development of the local capital market.
2022 marks 30 years of EBRD membership for Kazakhstan. It has benefited from around €10bn of investment to date, making it the largest and longest-running uninterrupted EBRD operation in Central Asia.
