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The Asian Development Bank (ADB) has approved $1 billion in loans that will help to upgrade most of Armenia’s main highways and facilitate the landlocked country’s commercial access to Georgia’s Black Sea coast. (UPDATED)

One of the loans worth $500 million will be channeled into the expansion and repair of roads stretching from the Armenian-Iranian border to one of the two main Armenian-Georgian border crossings.

The planned work is part of the North-South Road Corridor Investment Program formally approved by the Armenian government in early August. Prime Minister Tigran Sarkisian estimated the cost of the seven-year project at $1.5 billion and said the government hopes that the ADB will contribute about half of the required funding.

In a statement issued after a meeting of its Board of Directors on Tuesday, the Manila-based bank voiced support for the project, saying that it will cost $962 million and that $462 million of the sum will be raised by the Yerevan government and “other development partners.” It said the first $60 million tranche of the ADB loan will be used for reconstructing a 18-kilometer road north of Yerevan and improving the safety of another highway connecting the Armenian capital to the southern town of Ararat.

“Rehabilitating the road network is a top priority for Armenia as it can increase trade, investment flows, and jobs, while aiding regional cooperation and integration and increasing the country’s competitiveness,” Rustam Ishenaliev, a transport specialist for the ADB’s Central and West Asia Department, was quoted as saying.

It remains unclear how the Armenian side will contribute the rest of the sum needed for implementation of the large-scale project. An official in the Armenian Ministry of Transport and Communication told RFE/RL that the government hopes to attract the bulk of it from other international donors and lending institutions. No agreements to that effect have been reached yet, the official said.

Grappling with Armenia’s worst economic crisis since the early 1990s, the government is too cash-strapped to make significant financial contributions at the moment. The resulting sharp drop in tax revenues has left it planning to cut its budgetary expenditures by about 10 percent next year.

The ADB statement stressed the fact that the highways covered by the scheme connect with Georgia’s “southern corridor” leading to the Black Sea ports of Poti and Batumi. The ports process more than 70 percent of cargos shipped to and from Armenia.

In what appears to be a related move, the ADB also approved another $500 million loan that will be spent on road construction in southern Georgia and the Black Sea region of Ajara in particular. The Armenian and Georgian governments agreed last year to jointly seek external assistance for rebuilding highways in those areas to substantially shorten travel between Armenia and the Georgian Black Sea coast. Georgia is currently completing the reconstruction of a 50-kilometer highway in its Javakheti region bordering Armenia with financial assistance provided by the U.S. Millennium Challenge Corporation.

Armenian officials say another aim of the infrastructure upgrades in the two South Caucasus states is to make it easier for neighboring Iran to use Armenian territory for freight shipments to and from Georgia and other countries.
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