Sierra Leone will receive a loan of 30 million dollars (23 million euros) from India to revamp its aging water system in the capital and a town in the east of the country, the government said Wednesday,

"The loan is under a bilateral arrangement between the two countries aimed at developing the water component in the capital (Freetown) and Kailahun Town," said Water Resources Minister Ogunade Davidson told AFP.

"We are constantly faced with water shortage during the dry season (May to November) as the demand increases."

He said an Indian company, Angelic International, will undertake the project as part of government's plant to eventually provide pipeborne water to all 12 districts in the country.

After a decade-long civil war that ended in 2002, with heavy migration into the city, the stagnating water supply system is one example of the country's shattered basic infrastructure and Freetown faces serious water shortages.

The two state-run water companies, Guma and the Sierra Leone Water Company (Salwaco) are crippled by lack of funds.

Both complain of the reluctance by subscribers to pay their bills, water wastage from rusty pipes and people cutting plastic pipes to siphon off water.

"Our expenditure is high while our revenue is on the low side," complained Guma water engineer, Edward Mansaray.

Feasibility studies for a new dam at Orugu, 15 miles east of the capital have been completed and it will require some 300 million dollars to construct, according to experts in the Guma Water Company.

India has expanded its interest in West Africa in recent years and several high level state visits have taken place with Sierra Leone.

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