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ADB postpones a $200 million loan for North-South Transport Corridor to Azerbaijani Railways

ADB postpones a $200 million loan for North-South Transport Corridor to Azerbaijani Railways
06.02.2017

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The Asian Development Bank has postponed the allocation of a $200 million loan for North-South Transport Corridor to Azerbaijani Railways (ADY).

The ADB reports that the date of loan approval for the Railway Sector Development Program is not forecasted yet.

“The project fact gathering mission was postponed from 11-25 March for 1-11 August 2017, and the Bank’s Management Review Meeting (MRM) from 15 April for 25 August 2017, it was reported.

Previously, the mission was scheduled for 12-15 November 2016, the MRM for 12 December 2016. At the moment the ADB loan for the railway project is estimated at $200 million.

The project loan will be used mainly for investment in Baku-Yalama (border with Russia) rail line of the North South Transport Corridor. The project also will have some outputs: enhance management autonomy of ADY and transport sector governance, effective financial restructuring of ADY’s liabilities, enhance financial and management control, efficiency and reporting of ADY and business development and corporate restructuring of ADY.

Infrastructure rehabilitation of the North South Transport Corridor consists of: repair and rehabilitation of 441 km of single track between Baku and Yalama; development of computerized freight operation management system; and consulting service support to project implementation and future project development for subsequent ADB standalone loans or MFF financing.

The ADB also pointed to the ADY’s activity problems. According to the ADB, years of underinvestment and mismanagement have left railway assets in precarious conditions: half of rail track needs reconstruction/rehabilitation; the rolling stock is over aged and unserviceable with only 57% locomotives operational. In addition, the power supply and signaling systems need urgent replacement. The resulting sustained deterioration in service delivery has led to losses in railways’ market share. Corporate mismanagement and tariffs below cost recovery have aggravated the financial situation. The ADB says that the entire rail system needs to be modernized and institutionally reformed. Transport sector decisions also need to be taken in order to put railways at par with the financial circumstances of the road sector, in which no user-payer practice exists.


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