Sustainable Urban Transport Investment Program - Tranche 2

Overconservative cost estimation during the implementation of the multitranche financing facility (MFF) tranche projects may reduce the funding availability for other investments and result in low utilization of the approved MFF amount. Tranche 2’s actual total cost was $64.97 million, 60% of the budgeted amount, and ADB’s loan disbursement was only 61% of the committed amount. While government changes resulted in the early cancellation of one of the two subprojects (representing about $14 million), a contingency fund totaling $11.26 million (more than 10% of total project cost) estimated at appraisal was also not used. The government requested early loan cancellation in 2013 to save loan commitment fees because no other investment was ready for financing. In late 2019, it requested another loan cancellation as the change in design of a new subproject it proposed could not be approved because of the nearing end of the multitranche financing facility (MFF) timeframe. Overconservative cost estimation to avoid cost overruns during MFF implementation needs to be approached with caution as it could reduce the availability of funds for other investments while constricting the possibility of accommodating new investment opportunities because of the time required for processing them.