Finance Cabinet Secretary Henry Rotich said the loan will be paid over a period of 40 years, with a grace period of 10 years and at one percent interest rate from the 11th year.
However after 20 years, the interest rate will be at three percent.
The government has already commenced the upgrading the 24 kilometre Voi- Mwatate section at a cost of Sh2.3 billion.
“The Kenya section of the existing gravel road runs from the border at Taveta to Voi through Mwatate linking with Mombasa. The components of this project include design review and supervision, road side amenities, support to road safety initiatives and trade facilitation,” Rotich said during the signing ceremony.
The bank will finance the rehabilitation and the expansion of the 115 kilometre Holili-Arusha road and a 42 kilometre by-pass in Arusha, Tanzania, at a cost of Sh10.4 billion.
The completion of the two roads, by 2018, will increase trade between the Kenya and Tanzania.
“To complement the support from our development partners in realizing our vision 2030 objectives, the government is focusing on investing in priority sectors that will spur economic growth. We will ensure that we develop infrastructure in this country,” Rotich said.
The Arusha-Holili/Taveta-Voi road is one of the transport corridors of the East African Region meant to reduce the cost of doing business, increase competitiveness of the region on the global market and at the same time promote integration.
The corridor, at completion will link the port of Mombasa to northern and north-western Tanzania and the landlocked countries including Rwanda, Burundi, Democratic Republic of Congo and Uganda, providing an alternative route to the sea.
“The East African Community seeks to improve regional transport infrastructure to support economic and social development programs in the region, promote tourism and foster regional integration and at the same time reduce the cost of doing business,” AfDB’s regional Director Gabriel Negatu said.