World Bank Group’s New Strategy Supports Serbia in Restoring Growth and Accelerating EU Accession

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The FINANCIAL — The World Bank Group’s Board of Executive Directors on June 23 endorsed the Fiscal Year 2016-20 Country Partnership Framework (CPF) for Serbia.

The CPF proposes a World Bank lending program of up to US$1.6 billion and International Finance Corporation (IFC) financing of up to US$600 million over a five-year period aimed at supporting Serbia in creating a competitive and inclusive economy, and, through this, supporting integration into the European Union.

The Board of Executive Directors welcomed Serbia’s steady progress in implementing structural reforms that would bring macro-fiscal sustainability and create a market-oriented and competitive economy, and they noted the Government of Serbia’s strong commitment to these long-overdue reforms, according to the World Bank.

The CPF presents a strategy aligned with the World Bank Group’s twin goals of reducing poverty and increasing shared prosperity. It builds on the conclusions of the Systematic Country Diagnostic, which highlights the importance of getting Serbia back to economic growth.  Growth in Serbia has historically benefited the poor and vulnerable groups more than others. In order to get back to growth, Serbia needs to create an export-driven economy, while, at the same time, facilitating better access to the labor market for low-skilled and poor workers.

Under the CPF, the World Bank, IFC, and the Multilateral Investment Guarantee Agency (MIGA) will engage in a multi-faceted program that will aim to help Serbia attract the investment it needs to create growth and employment.

“Serbia has a historic opportunity to accelerate reforms and set out a path towards prosperity and integration into the EU. We believe the current reform momentum will help bring back growth, which is essential to poverty reduction, as growth in Serbia tends to especially benefit the poor and disadvantaged. Apart from generating growth, we believe that specific attention needs to be given to the creation of employment opportunities for marginalized groups and lower skilled workers, so that growth is also inclusive,” said Tony Verheijen, World Bank Country Manager for Serbia and main author of the CPF. “The new World Bank Group Strategy provides a comprehensive package of financial and advisory support to help government achieve these objectives as well as to prepare the country to become a competitive EU member state.”

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The CPF will focus on two broad priorities. In the first focus area of economic governance and the role of the state, the World Bank Group will support efforts to achieve more effective and efficient public expenditure management, enhance public administration capacity to implement reform and deliver services, resolve more than 500 remaining commercial state and socially owned enterprises and improve the performance of key state utilities and public transport companies. 

“Creating an effective and efficient public sector that facilitates private investment and delivers quality services to businesses and citizens is a key condition to bringing back growth and improving the life of people in Serbia,” said Verheijen. “We believe our efforts to help the government focus on core public sector functions, spend less, and perform better, will create the space and opportunities for the private sector to create the high value-added jobs Serbia needs.”

The second priority is private sector growth and economic inclusion. Under this focus area the World Bank Group will support government efforts to improve business regulation, create a transparent and effective system of land and property management, and improve the quality of infrastructure networks. IFC and MIGA support will facilitate new opportunities for private sector investment. Finally, efforts to enhance economic participation, in particular by the poor and vulnerable groups, will include an emphasis on labor market regulation, improved assistance to job seekers, and address short- and long-term skill gaps.

“IFC will be engaged in areas that create employment, including the financial sector to support SMEs, high value-added manufacturing, renewable energy projects, and private sector participation in infrastructure projects through investments and public-private partnerships,” said Thomas Lubeck, IFC Regional Manager for the Western Balkans. “IFC will continue to support efforts to improve the investment climate and attract foreign direct investments in Serbia, as well as engage in resolution of non-performing loans in Serbia.”

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The World Bank Group has had a long-standing engagement on financial sector strengthening in Serbia. Given the importance of access to finance for growth and development, a broad engagement on this issue will continue to be part of the World Bank Group, with mutually reinforcing support by IBRD, IFC, and MIGA and in close cooperation with other development partners.

“MIGA remains committed to supporting Serbia, one of the regional economies disrupted by the global financial crisis,” said Dan Biller, Sector Manager, MIGA. “In particular, our backing of the financial sector deepens credit markets, which, in turn, supports ongoing lending to small- and medium-size businesses, stimulating growth and job creation. We hope in the future to be able to support other investments, such as infrastructure, to help support Serbia’s development.”

Given the high risks that natural disasters pose to economic development and the impact of climate change on the poor, responding to climate change and disaster risks will be a cross-cutting theme of the CPF.

The World Bank currently supports eight projects in Serbia with a commitment of US$1.2 billion, while IFC has a committed portfolio of US$417 million in 25 projects, and MIGA is currently supporting seven projects with a gross exposure of US$860 million.


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