Parliament approved five loan agreements, with a total value of 16.3 billion Br on July 7, 2015, made between the Ministry of Finance & Economic Development (MoFED) and different developmental partners to finance various projects.
Three of the approved loan agreements are for road projects whereas the two are for agriculture and water supply projects.
The largest loan of 408 million dollars is for the construction of two roads. One of the roads is a 60Km road extending from Shambu, in the Wellega, west of Lake Fincha, to Bako, located in west Shewa Zone, both in Oromia region.
The financiers of the road projects are Arab Bank, which granted a 13 million dollar loan as well as the OPEC Fund for International Development (OFID), which loaned 25 million dollars.
Another loan agreement was approved for the second road project which is the fourth junction of the Modjo–Hawassa Expressway, which runs 57Km from Ziway to Arsi-Negele. The World Bank (WB) has loaned 370 million dollars for the junction, while the previous three junctions were financed by the African Development Bank (AfDB) and Korea Exim Bank.
The design of the first road project from Shambu to Bako is already complete, and it is to be followed by international competitive bidding for its construction. However, a review of the design will be made at the request of the financier, even though ERA disagreed, a source disclosed to Fortune.
The bidding process of the road project of Ziway to Arsi-Negele has already started.
The other approved loan agreements are for 440 million Br with Kuwait Fund for Arab Economic Development, signed June 16, 2015, to finance the Axum city water supply project and a 350 million-dollar loan agreement with the World Bank for the financing of the second phase of the Agricultural Growth Programme (AGP).
The former is a 25-year loan with five-year grace period to finance the Axum city water project, which was agreed on June 16, 2015 after a loan request made on September 5, 2013. This project involves the construction of 43,000 cubic metres of water treatment plant and the building of three water reservoirs with 1,100 cubic metres capacity, the construction of 8.5Km road leading to the dam site as well as the installation of a 42Km pipeline.
The city of Axum was selected because of its water supply problems and because its comparatively smaller project made it suitable for small funding from the Kuwait Fund for Arab Economic Development, according to Derje Girma, Senior expert of bilateral co-operation at MoFED.
Currently Axum gets water from Adwa, because its own water resources are salty. But because of its growing population, which is currently 150,000, and the over 130,000 annual visitors, the water from Adwa is no longer enough, Fitwi Giday, public relations director of the Tigray Water & Energy, told Fortune.
The last loan which Parliament approved was signed on May 7, 2015 for the AGP phase two project with a 38 year repayment period. The total cost of AGP, which is designed to benefit 1.6 million smallholder farmers by increasing productivity using different technologies and technical assistances, is 581.2 million dollars. The remaining amount will be financed by the government as well as other developmental partners including the community.
In submitting its request for the approval of the loans by Parliament, the government prioritised the need for road projects, noting that increasing the road network is essential in creating market access and improving the agricultural sector.