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Success in Romania encourages EBRD to extend municipal lending to an additional 10 cities across the country
To further improve water services for the urban population in Romania, the European Bank for Reconstruction and Development (EBRD) is increasing an existing US$ 28 million loan to five Romanian municipalities by US$ 75 million (ECU 65 million). The loan will finance priority investments in water supply and waste water in an additional ten cities and will help to improve the financial and operational performance in the water companies.
"The EBRD's first Municipal Utilities Development Programme helped establish a decentralised system of funding for urban infrastructure projects that has served as an important model in Romania," said Johan Bastin, Director of the EBRD's Municipal and Environmental Infrastructure team. "This time, as well as building on these objectives, the EBRD has focused on "institutionalising" municipal credit. Our long-term goal is to create a dedicated source of funds to give greater access to non-sovereign guaranteed finance for municipalities across Romania."
The EBRD's loan is to the Government of Romania, which will on-lend to the local governments and water companies of the ten cities of Arad, Bacau, Bistrita, Botosani, Braila, Cluj, Constanta, Focsani, Oradea and Tirgoviste. The total project cost of the new programme is US$ 188 million (ECU 163 million), which is expected to be co-financed with the European Commission's Phare programme as well as with central and local governments and the water companies themselves.
The investment component includes installing water meters, modernising and upgrading networks and equipment, increasing reservoir storage capacity as well as purchasing new monitoring systems and cleaning equipment. In addition, local authorities will be encouraged to assume greater responsibility for providing and financing municipal services in an accountable fashion, thereby providing better services for consumers, industry and commerce. As well as improving the water quality of the Danube River and the Black Sea, the municipal infrastructure investments will bring the water companies in line with European Union environmental standards.
The first EBRD loan and project agreements were signed in April 1995 with the cities of Brasov, Craiova, Iasi, Timisoara and Tirgu Mures. It marked the first time that an international financial institution had entered into direct contracts with Romanian municipalities.
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