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ADB, Azerbaijan sign new loan agreement

17 December 2009 15:05 (UTC +04:00)

Baku. Nijat Mustafayev - APA-ECONOMICS. The Asian development Bank and the Government of Azerbaijan have signed an agreement on the $75 million first tranche of the ADB multitranche financing facility.

The agreement was signed as part of the visit of Matthew Westfall, Director of Urban Services for ADBâ€™s Central and West Asia Department.

The ADB will extend up to $600 million in loans to Azerbaijan for water and sanitation improvements in towns that have suffered from decades of neglect and underinvestment in infrastructure.
The multitranche financing facility will release loans periodically to support the countryâ€™s Water Supply and Sanitation Investment Program. The Government has earmarked up to $200 million for the 8-year investment program, with ADB financing up to $600 million from its ordinary capital resources. In the first tranche, ADB provides a $75 million loan.
Azerbaijanâ€™s water and sanitation system is over 50 years old, and has fallen into decline following the dissolution of the Soviet Union and the countryâ€™s independence in 1991. Services in many secondary towns are bad, with poor piped water quality, broken or clogged sewage pipes, and wastewater discharged directly into waterways. Water purchased from private vendors to augment supply is expensive, imposing a burden on the poor.
The investment program is expected to improve the quality and coverage of water and sanitation for about 500,000 people in secondary towns and semi-urban areas outside the capital Baku. It will raise the quality and capacity of agencies tasked with planning, managing and operating services.
The multitranche financing facility establishes the foundation for an 8-year partnership between ADB and the government, allows for phased investments, and is backed by a clear strategy and program of reforms. The first tranche funds will reconstruct and build water and sewage infrastructure, expand the planning, technical and financial management capabilities of oversight agencies, and set up project management offices in the towns of Goychay and Nakhchivan. Subsequent tranches will carry out similar activities in other towns.
The investment program has special features: advance detailed design for the first tranche project, and completion of due diligence for the second tranche project. Ongoing advance procurement actions will ensure timely project preparation and loan release.
ADBâ€™s first tranche loan of $75 million has a 24-year term with a 4-year grace period and interest set according to its LIBOR-based lending facility. The Government of Azerbaijan is providing $25 million. The Azersu Joint Stock Company will act as the executing agency for all project activities except those in Nakhchivan Autonomous Republic, where the State Amelioration and Water Management Agency will be the executing agency.