MANILA, PHILIPPINES - The Asian Development Bank (ADB) is providing a $30 million loan to finance infrastructure repairs and upgrades in selected urban municipalities in Georgia which have been hard hit by the global economic crisis and conflict with the Russian Federation.

ADB's Board of Directors has approved the Municipal Sector Development Project (MSDP) 2 loan, adding to $40 million in financial assistance, approved in December 2008, for MSDP 1.

"Georgia needs the new loan facility since several urgent urban transport projects could not be accommodated in MSDP 1," said Arnaud Dauphin, urban development specialist of ADB's Central and West Asia Department. "The MSDP 2 will improve peoples' health and living conditions, and promote economic growth in urban areas."

Projects funded by the new loan will help alleviate heavy traffic congestion, air and noise pollution, weak traffic management, inadequate roads, and deteriorating public transport services. Work will include improvements to the main transit road artery in the capital Tbilisi; the rehabilitation of major road crossings and traffic light systems in the city, and road upgrades in the municipalities of Oni, Kada, and Shuakhevi in west and southwest Georgia. MSDP 1 is supporting upgrades of ageing urban water supply services and some municipal roads in remote cities.

Georgia's economy was badly affected by the conflict with the Russian Federation which damaged infrastructure and investor confidence, and caused bank liquidity to contract. The global economic crisis has worsened the situation.

Challenges in the urban transport sector in Georgia are formidable. In Tbilisi, which accounts for nearly half the country's gross domestic product, about 80% of air pollution is generated by motor transport. Road accidents have increased, with a 62% increase in the number of people injured, and public transport services have deteriorated because of poor road conditions, management deficiencies among road operators, and insufficient investment in fleet renewals.

"This loan is the first to directly target urban transport in Central and West Asia. This new focus ensures sustainable urban development in ADB operations," said Mr. Dauphin.

The loan for MSDP 2 will be sourced from the Asian Development Fund and will carry a 32-year repayment term including a grace period of eight years, and an annual interest rate of 1.6%.

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