Western Balkans Program Overview

The World Bank Group has been the key development partner in the Western Balkans and has supported the Western Balkan countries during the period of economic transition and early reforms. The World Bank Group also lead the post-conflict reconstruction in Bosnia and Herzegovina, and Kosovo.

Today, the World Bank Group supports the European Union accession path of the Western Balkan countries, and helps them to address their main development constraints.

The World Bank Group program currently supports reforms in the following main areas:

• macro, fiscal, and financial sustainability,
• governance, institutions and public sector reform,
• business environment, private sector development and competitiveness,
• jobs, and disincentives and barriers to work,
• regional cooperation and connectivity, and
• climate change and resilience.

World Bank Program

The World Bank Group program is anchored in the findings of the Systematic Country Diagnostic, completed to date in all six countries, and supports reforms in the following main areas: (i) restoring macro, fiscal, and financial sector sustainability, (ii) reforming the state and enhancing public service delivery, (iii) enhancing the business environment and regional connectivity, (iv) eliminating barriers to employment and labor force participation, and (v) building resilience to climate-related and other shocks.

As of October 2019, the World Bank active lending portfolio amounts to US$3.02 billion and includes 54 operations. The undisbursed balance is US$1.64 billion or about 58 percent of the active portfolio. The average project age is 4 years.

Partnerships and Trust Funds

Trust funds are an important part of the World Bank’s Program in the Western Balkans. Currently, the Western Balkan trust fund portfolio comprises about 100 individual tasks for which US$143 million of donor funding had been mobilized to date. European Union is by far the most prominent donor to the Western Balkans Program, and has provided over 60 percent of total TF financing. The Austrian Government, the Danish International Development Agency (DANIDA), the Global Environment Facility (GEF), and the Swedish International Development Agency (SIDA) continue to be important partners in the SEE.

SEE Regional Program

The World Bank will enhance the regional focus of the program, both through lending and knowledge products (Advisory Services and Analytics). While over the past years, the World Bank has contributed to informed policy making in Western Balkans by delivering several important regional knowledge products, the attention has recently shifted to regional lending operations that would address cross-country priorities in the area of connectivity, and equity. 

The World Bank recently formally launched preparation of a Western Balkans Trade and Transport Facilitation Project—to mark an era of enhanced regional cooperation within the Western Balkans. The objective of the Trade and Transport Facilitation Project is to foster greater economic integration among Western Balkan countries, and between them and the European Union, with a focus on reducing cost and time in trade and transport, strengthening coordination and institutional capabilities, and enhancing harmonization, transparency, and predictability of the trade and transport regimes. 

Recognizing the importance of fostering equitable growth across the Western Balkans, the World Bank is preparing the Western Balkans Regional Equity Development Policy Operation. The objective of the proposed Regional Development Policy Financing is to support the Governments of the Western Balkan countries in addressing the common challenges that hinder equity in access to economic opportunities.

Regional knowledge products will continue to address cross-cutting priority areas, and issues relevant for the EU aspirations of the Western Balkan countries.

IFC Program

International Finance Corporation (IFC) Strategy in Southeast Europe focuses on the following areas:

• Financial sector, to support systemic banks, small and medium enterprises and energy efficiency lending
• Climate change through investments in infrastructure and energy sectors
• Agribusiness, with an emphasis on food retail, and export oriented manufacturing
• Business infrastructure, with a focus on logistics and distribution
• Sub-national finance, with a focus on municipal infrastructure and waste management
• Tourism and tourism related projects
• Health and education
• Further improvements in business environment

IFC Program Highlights in SEE

• IFC has been active in the Southeast Europe since the early 1990s.
• IFC works with private sector clients, governments, and civil society to bring the benefit of global expertise to the region through its advisory services and investment projects.
• IFC’s priorities include: supporting competitive and export oriented companies, infrastructure development with a focus on climate change and improvements in investment climate.
• As of 30 June 2016, IFC’s committed investment portfolio in the Southeast Europe is US$1 billon, 74 percent allocated in loans and 26 percent in equity. In addition, IFC has supported about US$260 million in trade flows through its trade finance program (since the inception of the program in 2006). 
• Last fiscal year (FY16), IFC invested US$140 million (45 percent invested in regional projects) and mobilized additional US$52 million from our partners, supporting projects in the financial sector and manufacturing. 

Serbia became IFC member country in 2001. Since then, IFC has invested US$2.1 billion in long term finance, including US$794.7 million mobilized from its partners, financing 52 projects across a variety of sectors. In addition, IFC has supported trade flows of US$175.4 million through its trade finance program. As of 30 June 2016, IFC’s committed investment portfolio in Serbia is US$285 million. In fiscal year 2016, IFC invested US$69 million in Serbia. Key achievement in agribusiness sector: helped improve farming opportunities for 62,500 farmers.

Albania became IFC’s member in 1991. Since then, IFC has invested US$814.7 million, including US$330.9 million mobilized from our partners, financing 25 projects across a variety of sectors. In addition, IFC has supported trade flows of US$6 million through its trade finance program. As of June 30, 2016, IFC’s committed investment portfolio in Albania is US$186.9 million. Key achievement in the energy sector: Supported the construction of 53MW hydro power plant.

Bosnia and Herzegovina became IFC’s member country in 1996. Since then, IFC has invested US$398.3 million, including US$23.1 million mobilized from our partners, financing 46 projects. In addition, IFC has supported trade flows of US$52 million through its trade finance program. Our committed investment portfolio in Bosnia and Herzegovina as of 30 June 2016 is US$87.6 million. Key achievement in manufacturing: IFC invested €64.4 million in loans to Sisecam SodaSo Lukavac. The acquisition of SodaSo Lukavac by Turkey’s Sisecam in 2006 is one of the most successful privatizations in the county.

Kosovo became IFC’s member in 2009. Since then, IFC has invested US$391.4 million, including US$369.2 million mobilized from our partners, financing 5 projects. In addition, IFC has supported trade flows of US$4.8 million through its trade finance program. As of 30 June 2016, our committed investment portfolio in Kosovo is US$9.1 million. Key achievement in the energy sector: IFC supported the privatization of the distribution company. As a result of the privatization, subsidies from the budget were completely abolished, tax collection from KEDS almost doubled, and total tariff savings as a result of loss reduction are estimated to reach 20 percent of the total annual electricity sales.

North Macedonia (then the Former Yugoslav Republic of Macedonia) became an IFC member country in 1993. Since then, IFC has invested US$382.1 million, including US$181.7 million mobilized from its partners, financing 19 projects. In addition, IFC has supported trade flows of US$49.8 million through its trade finance program. As of 30 June 2016, IFC’s committed investment portfolio in North Macedonia is US$45.5 million. Key achievement in manufacturing: supported the construction of the Greenfield plant for airbag cushions by providing an €8 million loan to US-based Key Safety Systems (KSS).

Montenegro became IFC’s member in 2007. Since then, IFC has invested US$86.8 million financing 7 projects. As of 30 June 2016, IFC’s committed investment portfolio in Montenegro is US$29.2 million. Key achievement in microfinance: supported local microfinance institution to directly reach approximately 11,000 new micro and small enterprises.

MIGA Program

Multilateral Investment Guarantee Agency (MIGA) provides political risk insurance in the Western Balkans, covering close to US$1 billion in investments that are concentrated mostly in the financial sector. Among these, MIGA’s capital optimization product covers the mandatory reserves local subsidiary banks hold at their respective central banks from the risk of expropriation. The product enables international banks to optimize their capital position, and supports stronger lending activity in host countries.

Albania

Gross Exposure (US$m): 305

Type of Guarantees (Political Risk Insurance, PRI, or Non-honoring, NH): PRI

Sectors: financial sector and energy

Bosnia and Herzegovina

• Gross Exposure (US$m): 141
• Type of Guarantees (Political Risk Insurance, PRI, or Non-honoring, NH): PRI
• Sectors: financial sector and retail

Kosovo

• Gross Exposure (US$m): 89
• Type of Guarantees (Political Risk Insurance, PRI, or Non-honoring, NH): PRI
• Sectors: financial sector

North Macedonia

• Gross Exposure (US$m): 11
• Type of Guarantees (Political Risk Insurance, PRI, or Non-honoring, NH): PRI
• Sectors: financial sector

Montenegro

• Gross Exposure (US$m): no exposure
• Type of Guarantees (Political Risk Insurance, PRI, or Non-honoring, NH): NR
• Sectors: NR

Serbia

• Gross Exposure (US$m): 446
• Type of Guarantees (Political Risk Insurance, PRI, or Non-honoring, NH): PRI
• Sectors: financial sector