Azerbaijan, ADB sign loan agreement for rehabilitation of North-South Corridor section

The Azerbaijan Railways (ADY) and the Asian Development Bank (ADB) have signed a loan agreement worth $131.5 million to improve a key segment of the International North-South Transport Corridor in Azerbaijan, aimed at enhancing regional connectivity.  

The agreement was signed by ADY Chairman Rovshan Rustamov and new ADB Country Director for Azerbaijan Sunniya Durrani-Jamal, Caliber.Az reports per local media.  

The total cost of the project is $160.5 million, with $29 million to be provided by the Azerbaijani government. The loan will be repaid over 22 years, including a two-year grace period, with an interest rate determined under ADB’s flexible loan product. Interest and other payments on the loan will be made bi-annually, on May 15 and November 15 of each year.  

The funds will be used to complete the rehabilitation of 166 kilometres of the double-track railway, including civil structures and railway crossings on the Sumgayit-Yalama section. This loan serves as additional financing for the Railway Sector Development Programme approved in 2017, which focuses on modernising the country’s railway operations.

Initially, the bank allocated $150 million to ADY. The additional funding will expand the original project, covering the rehabilitation of approximately 333 kilometres of the main railway line from Sumgayit to Yalama, including civil work and railway crossings. The project is expected to be completed by December 31, 2025.  

According to the agreement, the borrower is required to regularly adjust tariffs for freight and passenger transport for ADY to maintain financial stability by covering market risks, including adequate coverage for debt servicing, as well as inflation, currency, and interest rate risks. ADY must maintain a debt service coverage ratio above 1.1 upon completion of the approved financial restructuring plan, starting from 2024.  

ADY also commits to ensuring the proper maintenance of the infrastructure and condition of the tracks and other project facilities (such as electrification, signaling, and telecommunications equipment for the designated railway line) to ensure the safe and efficient operation of both freight and passenger trains.  

Since Azerbaijan's accession to the Asian Development Bank (ADB) in 1999, the bank has provided over $5 billion to support sovereign and private projects in such sectors as transportation, energy, healthcare, and agriculture. Established in 1966, the ADB has 68 members, 49 of which are located in the region.

By Naila Huseynova