Asian Development Bank (ADB) has approved two loans totalling $400m to strengthen the Azerbaijani railway sector and modernise the Sumgayit-Yalama rail line.

Approximately $250m of the loan will be used to carry out a series of reforms to enhance rail service in the country, as well as improve governance and financial management of Azerbaijan Railways.

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The remaining $150m will finance the rehabilitation of the 166km Sumgayit-Yalama double rail line on the North-South Railway Corridor, which serves as an important strategic connection linking the Russian Federation in the north and the Islamic Republic of Iran in the south.

“Modernising Azerbaijan’s rail transport system is a critical component in the government’s efforts to diversify the economy and strengthen regional cooperation and trade.”

ADB Central and West Asia Department director general Sean O’Sullivan said: “Modernising Azerbaijan’s rail transport system is a critical component in the government’s efforts to diversify the economy and strengthen regional cooperation and trade.

“Reforms to Azerbaijan Railways and the support to the North-South Railway Corridor will help put Azerbaijan Railways on a sustainable growth path, improve services, and attract greater traffic with the improvement of an important regional transport link.”

The modernisation of the railway sector will enable Azerbaijan to provide a cheaper, energy-efficient and safer transportation alternative to the commuters.

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The programme also requires Azerbaijan Railways to start multiple reforms to ensure better management of its debt load, improve financial reporting and human resources policies.

Azerbaijan joined ADB in 1998 and has since received nearly $4.1bn as grants and loans.