The World Bank (WB) and the Azerbaijani Transport Ministry signed a new loan agreement on a project to expand the 100km-long Baku-Shamakhi-Mugan Highway from two to four lanes last week.
The bank will allocate $241.6 million to finance the project in the form of mixed credits - $70 million will be funded by the WB International Development Association (IDA), and $171.6 million will be provided by the International Bank for Reconstruction and Development (IBRD). The remaining funds will be provided by the state. The total project cost is $356.15 million.
It once more testified that the Azerbaijani government is continuing actions directed at improving the transport infrastructure. State-of-the-art road requires tremendous funds and to solve the issue with financing transport project it is rather profitable to attract international financial institutes to cooperation.
The project will initiate the third stage of the WB assistance to Azerbaijan's banking sector, which includes two directions. First of them concerns the network of Azerbaijan's main roads and transit corridors, and the second local roads, reconstructed within the strategy of regional development.
The agreement was signed as result of work of the WB's three-day mission, headed by project manager Jacques Bury in early August. The mission reviewed the third main project to expand the Baku-Shamakhi-Mugan Highway from two to four lanes.
Transport Minister Ziya Mammadov and WB Country Manager Joseph Owen signed the agreement. This is the first such agreement signed by Owen since his appointment in August 2010.
IDA credit resources allocated for a period of 20 years with a grace period of 10 years, and the IBRD - 17 years with deferred payments in four years.
Baku-Shamakhi-Mugan is 122 kilometers in length. A total of 101 kilometers will be built within the project. The remaining section of the road has already been constructed.
The project will enable to increase efficiency and security of the road, strengthen management over administering main highways, to improve the quality of transport services in mountainous northern regions, which possess significance tourist and production potential.
Thus despite the global financial crisis, which greatly reduced the volumes of the global goods turnover and respectively, the cargo deliveries between Asia and Old World, considerable funds are invested in Azerbaijan in upgrading transport infrastructure to shape new regional routes. Even if it increases the country's foreign debt, qualitative roads are above this financial problem for their significance. High oil production volumes and similar high oil process will help Azerbaijan to pay off loan timely, while we will have a powerful transport infrastructure.