Azerbaijan’s road network includes, in addition to secondary and local roads, two major highways: the east–west highway linking Baku, the country’s capital, to the Georgian border, and (ii) the north–south highway running from the Russian Federation border to the Iranian border via Baku. The east–west highway, which is about 500 kilometers (km) long, is one of Azerbaijan’s main transport links to the western region and for external trade. The network was developed primarily under the former Soviet Union, when traffic volume was much higher.

Vehicle axle overloading and the lack of resources for maintenance have left three-quarters of the entire road network in Azerbaijan in poor condition. Most of the east–west highway, connecting with the Georgian border, has been improved with external assistance. The World Bank assisted improving the Ganja–Qazakh section (94 km), and the European Bank of Reconstruction and Development (EBRD) funded work on the Hajigabul–Kyurdamir section (85 km). The government requested the Asian Development Bank (ADB) to provide financing for the two sections of the east–west highway: the Gazakh–Georgian border section (39 km) and the Ganja bypass road (39 km) forming part of Yevlakh–Ganja section. Accordingly, ADB approved two loans for the East–West Highway Improvement Project in December 2005— a loan of $49.0 million from ADB’s ordinary capital resources (OCR) and another loan in various currencies equivalent to SDR2,075,000 ($3.0 million) from its Special Funds resources.

However, during implementation, the project experienced unprecedented increases in prices for fuel, utilities, and major road construction materials, which significantly increased the cost of constructing the Gazakh–Georgian border section of the road.2 This rendered the available funding insufficient to finance the Ganja bypass road. The government and ADB agreed to change the scope of the East–West Highway Improvement Project and exclude the Ganja bypass road (39 km).