MUNICIPAL UTILITIES DEVELOPMENT PROGRAMME - PHASE II

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Loan financing of water sector investments in ten medium-sized cities, together with support to the institutionalisation of municipal credit and programmes for municipal utility corporatisation. Project objectives: (i) Finance priority water-supply and waste-water investments to improve service provision; (ii) enable the institutionalisation of municipal credit; (iii) enhance the performance of the water companies and municipalities. The project will introduce credit to the financing of municipal investments, and by institutionalising municipal credit will impact the whole structure of the municipal finance system. The municipal infrastructure investments will also support harmonisation with EU environmental standards, and provide better services for consumers, industry and commerce. The Government of Romania will on-lend the proceeds of the loan to local governments and water companies in ten cities (Arad, Bacau, Bistrita, Botosani, Braila, Cluj, Constanta, Focsani, Oradea and Tirgoviste). During implementation, steps will be taken to institutionalise municipal credit provision to enable wider access to credit for municipalities across Romania. A sovereign loan of US$ 75 million (ECU 65 million). Co-financing is anticipated with EC Phare, as well as with central and local governments and the water companies. US$ 188 million (ECU 163 million). This project will have environmental benefits, particularly with respect to the health of the population. It will lead to better living conditions and reduce health hazards from water contamination by improving waste-water collection and treatment. Environmental issues associated with the investments have been identified in an environmental analysis and addressed with adequate mitigation measures. Technical cooperation totalling ECU 4 million has been committed during project preparation, and a further ECU 5 million is anticipated during implementation.