The South Korean government will provide 18.7mn lempiras (US$990,000) to launch technical studies for the Guacerique II reservoir in Honduran capital Tegucigalpa.
The funds will be provided via the Korea International Cooperation Agency (Koica), according to a Honduran government release.
The reservoir will have capacity of 45M-50Mm3 and will occupy 400ha. Construction is expected to take between four and five years, with an estimated cost of US$175mn.
Honduran authorities have already met with representatives from the World Bank and IDB to discuss the reservoir project, and meetings to agree financing will be held once studies are completed, BNamericas reported previously.
The project aims to solve the issue of recurring droughts in Tegucigalpa. Around 1.5mn people living in the capital faced water shortages during 2010.