But plan is to boost power generation by using natural gas and coal, and cutting dependence on hydro

By Fumbuka Ng'wanakilala

DAR ES SALAAM, Aug 8 (Reuters) - Tanzania plans to spend 7 trillion shillings ($3.21 billion) over the next five years to connect about 1 million rural households to electricity, a senior government official said on Monday.

East Africa's second-biggest economy wants to use some of its natural gas reserves to end power shortages and boost industrial growth.

"The five-year rural electrification project whose implementation starts in this 2016/17 government financial year is expected to benefit up to 5 million people," Gissima Nyamo-Hanga, acting director general of the state-run Rural Energy Agency (REA), told Reuters.

"Most of the 7 trillion shilling funding will come from the government's own sources, but we also expect to get financial assistance from our development partners to implement the project."

Nyamo-Hanga said the government has already allocated 534.4 billion Tanzanian shillings for the rural projects in fiscal year 2016/17.

An estimated 40 percent of Tanzania's population of around 47 million currently has access to electricity, according to official figures.

The government wants to lift the proportion of the population with access to electricity to 85 percent by 2025.

Tanzania aims to boost power generation capacity to 10,000 megawatts over the next decade from around 1,500MW at present by using natural gas and coal and reducing its dependence on hydro power sources.

Tanzania announced in February it had discovered an additional 2.17 trillion cubic feet (tcf) of possible natural gas deposits in an onshore field, raising its total estimated recoverable natural gas reserves to more than 57 tcf.

Investors have long complained that a lack of reliable power was one of the obstacles of doing business in the country. ($1 = 2,183.0000 Tanzanian shillings) (Reporting by Fumbuka Ng'wanakilala; Editing by George Obulutsa and David Evans)

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