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Georgia: Improving Lives of People and Supporting Regional Development

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Georgia: Improving lives of people in Georgia and supporting regional development

Developing municipal infrastructure and constructing houses for internally displaced persons.


The project has implemented 113 water, wastewater and road subprojects throughout Georgia in 53 urban and rural municipalities benefitting about one million inhabitants, half of which are women. Also, following the armed conflict of 2008, the project has constructed in a record time 783 houses, benefiting about 3600 internally displaced persons (IDPs).



Since Georgia’s independence in 1991, many years of decline in the quality, coverage and maintenance of basic urban services had reduced dramatically the quality of life and constrained private sector growth. The situation has improved over the last decade, but roads, water and sanitation infrastructure have remained in need of substantial rehabilitation in much of the country. The August 2008 conflict has resulted in shocks to the key pillars of economic development, and increased numbers of IDPs with no homes by 30,000 people.


The project has provided financial resources to creditworthy municipalities to finance investments for the rehabilitation and expansion of priority municipal services and infrastructure needs on a sustainable basis. It has enhanced the credit culture among municipalities and created a revolving fund managed by Georgia Municipal Development Fund (MDF), which is the project implementing entity, established with technical assistance from the World Bank. The project has also channeled grant funding through MDF to small municipalities in order to implement high priority municipal services and infrastructure subprojects and strengthen their financial management and fiscal discipline to become creditworthy.

Over the years, MDF has become a solid non-bank financial intermediary that plays an important role in preparing and funding municipal infrastructure projects. The MDF’s good performance has led to a growing interest from both the government and the donors to use it as a primary organization for channeling grants and credits to the Georgian municipalities.


The project achieved the following results between October 2008 and January 2011:

I. Municipal infrastructure in municipalities (IDA and IBRD):

  • Reduction in electricity consumed due to installation of more energy efficient water systems (from average 0.7 kilowatt hour consumed/ m3 to 0.4).
  • Increase in hours of piped water service (from average 7 hours/day to 12).
  • Reduction in vehicle operating costs due to improved urban roads condition (by average of 25 percent).
  • Increase in number of people in project areas with access to improved water sources (from 0 to 90,000).
  • Increase in piped household water connections that are benefiting from rehabilitation works undertaken by the project (from 0 to 30,000).

II. Emergency construction and rehabilitation in IDP settlements (IDA and EU):

  • Construction of 783 houses, benefiting about 3600 IDPs.
  • Rehabilitation of drainage channels and pedestrian crossings in eleven IDP settlements.
  • Construction of a bridge over the Mtkvari River leading to Akhalsopeli IDP settlement.
  • Provision of 133 solid-waste containers and eleven trucks.
  • Improvement of the physical conditions of 1263 houses in nine IDP settlements.

Bank Contribution

The Regional & Municipal Infrastructure Development Project (2008-2012) has a total cost of US$ 65.40 million, of which IDA finances US$ 40 million. The Additional Financing (2010-2012) has a total cost of US$ 58.80 million, of which IDA finances US$ 11.50 million and IBRD finances US$ 33.50 million.


The World Bank and the U.S. Millennium Challenge Corporation (MCC) have entered into an innovative partnership around the MDF, under which MCC provides US$ 85 million for municipal infrastructure development over the period 2006-2011, and the World Bank provides technical, safeguards and procurement quality assurance and supervises implementation under a fee-based service arrangement. Similarly, the World Bank and the European Union (EU) have concluded a partnership agreement (2010-2011) by which the EU provides EUR 3.00 million trust fund to co-finance the improvement of the IDPs’ housing and infrastructure conditions. The Bank is also collaborating with ADB, EBRD, USAID, German Cooperation (GTZ and KfW), European Investment Bank (EIB), UNHCR and the Cities Alliance Program, all of which provide financing or technical assistance to the municipal sector in Georgia. 

Moving Forward

Georgia appears to be on target to achieve the Millennium Development Goals pertaining to water and sanitation by 2015. The MDF turnover has grown multifold; compared to its initial GEL3.9 million loan portfolio in 2001 the turnover reached about GEL230 million in 2010. The current portfolio includes 5 different credits with GEL50 million new on-lending credits, and 10 various grant activities with nearly GEL180 million grant subprojects in 2010. However, significant investment is still needed to rehabilitate poor water, wastewater, solid-waste management, and road infrastructure, as well as to continue institutional capacity building. The ADB, EBRD and EIB plan to provide substantial financing to the sector, while the World Bank may provide further additional financing if needed.


The total number of beneficiaries with improved access to water and road services between October 2008 and March 2011 is about one million inhabitants, half of which are women.

Mrs. Ketevan Bestaeva is an IDP, she has 7 children and a grandchild. She comes from Varta village which had to be evacuated during the 2008 armed conflict. She and her family received one of the newly constructed houses for IDPs. “The house is now totally refurbished, walls repainted, and floors changed”, Ms. Bestaeva said. “Each family received from the government a full set of furniture, TV, refrigerator, a kitchen garden to plant vegetables and a nearby 0.3-0.7 hectar of land to cultivate in order to support our economic livelihood”, she added.

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