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Railways are important components of national transport systems. They have significant macroeconomic impacts through employment, financial deficits, service to other parts of the economy, and links to international trade. They can also play a constructive role in promoting energy efficiency and environmental enhancement. As a result, the Bank has been active in railway lending since the Bank's inception, and should continue its involvement. This paper examines the Bank's experience in railway lending, beginning with the technically focused, project-type loans of the early years and continuing through the results of the more recent and broader sector, public enterprise and structural adjustment lending. The paper reviews railways restructuring experience in developed countries, develops the lessons to be learned from developing and developed country railway reform, and discusses the role which enhanced private sector involvement has played, or could play, in improving railway performance. The paper concludes that the Bank's lending to railways has measurably improved over the last decade, but that the direction and degree of change can be further enhanced. Finally, the paper proposes a new framework for railway lending, with increased emphasis on the need to understand and reshape the railway as an institution and on adjusting the Bank's lending program to the characteristics of the railway and the country's national policy environment.
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