Engineering Economics Evaluation of Capital Lockup and Delayed Reservoir Impoundment: A Forensic Financial Audit of the Zarima–Mayday Dam Project, Ethiopia

Large-scale water infrastructure projects require timely commissioning to generate economic returns and recover invested capital. Delays in reservoir impoundment can significantly reduce project performance by increasing capital lockup, deferring revenue generation, and amplifying financing costs. This study presents an engineering economics evaluation and forensic financial audit of the Zarima–Mayday Dam Project in northern Ethiopia, which was constructed with an initial investment of ETB 13.0 billion (approximately USD 541.67 million at 24 ETB/USD) to irrigate a 40,000-ha commercial sugarcane estate. Owing to delayed reservoir impoundment following completion of civil works, the project remained largely non-operational for approximately ten years. An engineering economics framework based on discounted cash-flow analysis was applied to quantify the economic impacts of project delay. The assessment evaluated the present value of locked capital, annual foregone agricultural revenue, Net Present Value (NPV), Internal Rate of Return (IRR), Benefit–Cost Ratio (BCR), and Capital Recovery Factor (CRF), while accounting for compound interest, inflation, and exchange-rate depreciation using an updated benchmark of 180 ETB/USD. The results indicate a cumulative economic loss of approximately ETB 378.51 billion (about USD 2.1 billion), comprising ETB 155.39 billion in compounded capital lockup and ETB 223.12 billion in foregone agricultural revenue. The Benefit–Cost Ratio declined from 1.45 to 0.28, while the Internal Rate of Return fell below the minimum acceptable discount rate, indicating a substantial deterioration in economic viability. The proposed framework provides a quantitative basis for evaluating delayed infrastructure projects and supports improved commissioning strategies, investment planning, and financial management of future large-scale dam and irrigation developments.