Funding
Once the expenditure side of the budget is estimated it is then necessary to arrange the money to cover these expenses. This is known as arranging finance or funding and one of the ways of doing this is to take out a loan.
A loan agreement between the Japan Bank for International Cooperation (JBIC) and the Republic of Turkey has been signed. The loan is to cover the costs for the engineering and consulting services including supervision and the construction costs for the Istanbul Strait Crossing portion of the Project; i.e. the tunnelling works, the deep stations and some related Electro and Mechanical works.
This is called ODA (Official Development Assistance) loans, a soft loan with very low interest rate and long repayment period, which provides financial assistance of funds needed for the self-help efforts of the country borrowed.
This type of funds are envisaged to use for global issues such as energy, food supply, global environment, solution of poverty and economic and social infrastructure development of the borrower's country.
The principal sources of funds are capital contributions the Japanese government's General Account Budget, which comes mainly from people's tax revenues, government bond issue and public postal savings in Japan. In the implementation of ODA loans, JBIC is promoting public relations and information disclosure, both in Japan and abroad, to build broader understanding and support for ODA loans.
As for the first part of the Istanbul Strait Crossing portion of the Project, the soft loan with interest rate of 0.75% per annum and repayment period of 40 years including 10-year grace period is applied.
This graph shows contribution amounts of countries in the year of 2000
In Summer/Autumn, a principal loan agreement between the European Investment Bank (EIB) and the Republic of Turkey has been arranged.This loan is to cover the Infrastructure and all the Commuter Rail Systems of for example the tracks,signalling,stations,operations and control centre and power supply from Halkalı to Gebze.The final portion of the funding needed for the rolling stock will be arranged in 2004/2005.
When arranging finance, the financiers need to know if the Project will generate a financial return, i.e. generate one or more income streams that when combined will cover operating costs and pay off the loan. If this is the case then financing is usually readily available. If however, a Project cannot generate enough income to pay off its debt and cover its operating costs, then it is not a financially viable Project and the shortfall must eventually be paid for by the general taxpayer rather than the beneficiaries of the Project.