World Bank eyes $410 million funding for Liveable Baku project

The World Bank (WB) plans to provide $410 million for the implementation of the "Liveable Baku" project.

The project is scheduled for appraisal by October 26, 2026, while approval by the Bank's Board of Executive Directors is expected on February 18, 2027, Caliber.Az reports via local media.

The financing will be provided through the International Bank for Reconstruction and Development (IBRD), part of the World Bank Group. 

The project's total cost is estimated at $501.25 million, with the Azerbaijani government expected to contribute $91.25 million. The initiative aims to improve quality of life and strengthen climate resilience across Greater Baku and neighbouring areas.

The project will finance a coordinated package of investments and institutional reforms designed to address the Azerbaijani capital's most pressing urban environmental challenges. It consists of three complementary investment components and one project management component. Its theory of change is based on the premise that improving Baku's liveability and resilience requires simultaneous action to close infrastructure gaps, reduce environmental pollution and strengthen institutional capacity.

The first component, Integrated Solid Waste Management, will finance civil works, goods and services to modernise solid waste management infrastructure across Baku and the Absheron district. Key investments include the construction and operation of sanitary landfills meeting international environmental standards, waste transfer stations, and material recovery facilities to improve resource recovery and reduce landfill disposal. The component will also support the expansion of source-separated waste collection, recycling and the development of a circular economy.

The second and largest component, Remediation of Contaminated Lakes and Land, focuses on rehabilitating natural lakes and oil-contaminated sites, which represent some of Baku's most significant environmental liabilities. Funding will be allocated to restore three priority lakes—Zykh, Khojasan and the western section of Boyuk Shor—all of which have suffered decades of industrial and domestic pollution.

The component will also support the remediation of selected oil-contaminated land across Greater Baku. The restored areas are expected to deliver significant environmental benefits by expanding green spaces and releasing land for urban development.

The third component, Institutional Strengthening, aims to enhance the capacity of government agencies responsible for planning, managing and maintaining an environmentally sustainable and climate-resilient urban environment. Activities include strengthening integrated urban planning and management, establishing land management systems, and supporting reforms in the solid waste sector, including regulatory, tariff and legislative reforms.

The fourth component, Project Management, Monitoring and Evaluation, will finance the operational costs of the Project Implementation Unit, including procurement, financial management, compliance with environmental and social standards, monitoring and evaluation, and communications. It will also support the development of a monitoring and evaluation framework, including baseline data collection and performance reporting.

The World Bank said the project is needed because decades of oil production and industrial activity have resulted in extensive soil and water pollution.

"The situation is compounded by deficiencies in the waste management system and the city's exposure to natural hazards, including earthquakes, flooding and extreme heat. The project's environmental and social risks have been classified as high at the concept stage," the project description states.

Implementation will be overseen by a hybrid Project Implementation Unit under Azerbaijan's Ministry of Economy, working with relevant ministries and municipal service providers.

The World Bank noted that Azerbaijan is an upper-middle-income country whose economy has traditionally relied on hydrocarbon revenues, enabling substantial public investment in infrastructure and human capital. However, it said the country now faces the challenge of diversifying its economy to reduce dependence on oil revenues, while the government is pursuing structural reforms aimed at boosting productivity, attracting foreign investment and improving public services and the urban environment. Although Baku has experienced rapid urban growth over the past two decades, the Bank said this development has been uneven.

Climate change is intensifying existing challenges, with rising temperatures worsening the urban heat island effect and increasing environmental stress across the metropolitan area. Addressing these systemic urban issues is critical to Azerbaijan's broader ambitions for sustainable and climate-resilient economic development, the Bank's experts said.

They added that effective management of Baku's urban ecosystem requires close coordination among several institutions, including the Ministry of Ecology and Natural Resources, the Azerbaijan State Water Resources Agency, the State Committee for Urban Planning and Architecture, SOCAR, and Tamiz Shahar, the state-owned solid waste management company.

"Institutional capacity, coordination mechanisms and reliable information systems for integrated urban management remain under development. Baku's 2040 Master Plan, prepared by the Azerbaijani government, provides the overarching strategic framework for the capital's long-term development and envisages a $55 billion investment programme to transform Baku into a liveable, competitive and resilient metropolitan area. The $500 million Liveable Baku project directly supports the environmental and resilience objectives of the Baku 2040 Master Plan," the World Bank said.

By Aghakazim Guliyev