Kuwait Fund Refused to Finance Kurdamir-Ujar Road

Business Materials 11 November 2006 12:39 (UTC +04:00)

The Kuwait Fund for Economic Development has refused to finance a project on reconstruction of highway Kurdamir-Ujar to the Azerbaijani Government. The main reason of this refusal was Azerbaijani refusal to guarantee the credit recourses involved along with assets of the State and the Central Bank of the Country, a source in the Cabinet Ministers of Azerbaijan told Trend. Such terms were stipulated in the credit agreement in case of problems with the credit repayment the country might face in future, to the Kuwaiti Fund.

The Central Bank of Azerbaijan is not responsible for commitments of the State, as it is underlined in the national legislation, that it has no right to deposit its assets. In this connection, the Azerbaijani party has refused to accept these terms of the Kuwait Fund, thereby the Fund rejected to grant the credit.

At the same time, the Azerbaijani Government has received the preliminary consent from the World Bank (WB) on financing this section of the highway. Though the conditions of WB within the International Bank for Reconstruction and Development (IBRD) are not agreeable as the Kuwaiti Fund (22 years with a four-year lax period and the interest of 2.5% per annum). The interest rate of IBRD is libor+0.3%, with interest libor being up to 5.4% per annum as of today).

The preliminary cost of highway section Kurdamir-Ujar with the length of 46.2 km. was estimated at $18.29 mln. But that cost was determined on the basis of the feasibility study prepared in 2000. 75% out of the total cost of the project was expected to be financed at the expense of the Kuwait Fund. Other 25% was to be financed by the Azerbaijani Government. The Fund was ready to grant a credit at 4.2 mln. Kuwaiti Dinars (some $14 mln.).

Due to the rise in prices on construction materials, the value of the project has been to reconsidered by the Azerbaijan Transport Ministry. Highway section Kurdamir-Ujar is expected to be dual, therefore the rise in the cost of the road building is most likely to be $50 mln.