The European Investment Bank (EIB) has lifted its two year funding freeze on Zambia and agreed to fund €80m for rehabilitation of the Great East Road.

The project involves re-laying a 360km key road linking Zambia to Malawi and Mozambique, built almost 40 years ago.

The European Investment Bank had frozen lending to Zambia in 2009 after the bank’s inspector-general raised concerns about governance at state-owned power company Zambia Electricity Supply (Zesco), whose projects it co-financed.

Great East Road forms a part of the regional Nacala Corridor and under the project the road is planned to be reconfigured, including general rehabilitation and bridge replacements, while the related corridor developments include road and rail upgrading in Malawi and Mozambique.

After upgrading, the road project is expected to offer a shorter route to the sea port facilitating faster Zambian imports and exports than other existing routes through South Africa and Tanzania.

Completion of the project is expected to offer savings in vehicle operating costs and travel times, as well as reduce the risk of road accidents.

The road project feasibility study, detailed design and tender documentation has been funded by the European Commission (EDF9).

The entire project is estimated to cost €250m and it will be implemented by the Government of Zambia.

After lifting the lending freeze EIB president Philippe Maystadt was quoted by Dow Jones as saying: "We are pleased to note the public statements by President Michael Sata and government declaring fight against corruption a key priority.

"We are also pleased with the numerous institutional changes aimed at strengthening corporate governance, including changes in leadership at both ZESCO and Anti-Corruption Commission," Maystadt added.

In addition, EIB will also provide a $64m Ioan to the Itezhi-Tezhi Power Project by December 2011.

The project is expected to cost $133m and it could be part financed by the African Development Bank and the Development Bank of France.