Europe and Central Asia Fast Facts, Countries eligible for World Bank borrowing

Notwithstanding the recent tendency of the poorer countries of Europe and Central Asia in the Commonwealth of Independent States and South Eastern Europe to grow more quickly than countries in Central and Eastern Europe, vast differences remain in levels of poverty and human development and in the conditions necessary for sustainable growth. Per capita income ranges from $10,070 in Slovenia to $200 in Tajikistan, and the extent of poverty runs from more than 50 percent of the population in the poorer countries of the region to low single-digit levels in most countries in Central and Eastern Europe.

Given this diversity the Bank’s country assistance programs are being tailored to each subregion, and sector strategies promote subregional cooperation in solving common problems. The Commonwealth of Independent States and South Eastern Europe country programs, where the challenges of poverty reduction are greatest and which account for an increasing share of the Bank’s activity in the Europe and Central Asia region, emphasize institutional development and subregional cooperation in trade and transportation, infrastructure, and environment. Programs for European Union accession countries and other middle-income countries increasingly are focusing on knowledge services and knowledge economy development. In Turkey, which has made considerable progress since the onset of the financial crisis, the Bank’s program underscores the structural changes needed for sustainable growth and macroeconomic stability.

WORLD BANK ASSISTANCE

The World Bank’s Europe and Central Asia region operations stress policy reform, institutional development, and the investment needed to underpin sustained growth and poverty reduction. Lending during fiscal 2003 reached $2.7 billion ($0.6 billion IDA and $2.1 billion IBRD), and Global Environment Facility commitments totaled $27.3 million. In advisory services, 81 analytical reports were delivered, and 63 technical assistance engagements were undertaken regionwide. In addition, the Bank presented to the Board Transitional Support Strategies for Kosovo and Serbia and Montenegro (formerly, the Federal Republic of Yugoslavia); a Country Assistance Strategy (CAS) Progress Report for Bosnia; and Country Assistance Strategies for Azerbaijan, the Kyrgyz Republic, Poland, Tajikistan, and Turkey. Moreover, the Bank developed CASs for Azerbaijan, the Kyrgyz Republic, and Tajikistan in the context of completed Poverty Reduction Strategy Papers (PRSPs).

BUILDING THE CLIMATE FOR INVESTMENT

Recent growth trends suggest that there have been substantial improvements in the investment environment in the region. Recent business survey data confirm that businesses perceive significant improvements. (See box 5.5.) Nonetheless, the data also indicate considerable scope for further improvement. The Bank is thus supporting the reform of policies and the development of institutions to maintain macroeconomic stability, increase trade, strengthen public and private sector governance, reduce corruption, enhance the financial system, and support the physical infrastructure underpinning economic production.

Bank operations address the perverse incentives and weaknesses in institutional capacity that are the root causes of investment climate problems. The Bank is providing support to identify and change policies that invite “investment-unfriendly” behavior, such as multiple tariff rates and complicated customs procedures; and to improve institutional structure and performance, for example, by setting up independent regulatory bodies. To strengthen the effectiveness of the public sector, the Bank is encouraging citizen participation, transparency, and accountability, and helping improve key public sector functions, such as customs, tax administration, and treasury systems.

EMPOWERING POOR PEOPLE

Although Europe and Central Asia’s human development indicators remain impressive, a systematic assessment found that many of the region’s poorer IDA countries are unlikely to reach key human development Millennium Development Goals (MDGs; see box 5.5). This situation arises from the deterioration of human development and social assistance programs as a result of poor program design and inadequate financing.

The Bank’s operations in human development emphasize incentives to expand access and increase the quality of health and education services. This is done in part by empowering service beneficiaries to demand better access and quality, and by supporting provider efforts to meet this demand. Empowerment is supported through operations that promote decentralization, the reform of financing to link budgets to services provided, the support of inclusive development programming processes, and the increased use of community-driven development approaches to service delivery. On the provider side, operations focus on reforms in the public sector to balance the roles regarding the provision and financing of primary, secondary, and tertiary services, the modernization of services, the rationalization of staffing, and improved administration. In social protection, Bank operations support the consolidation of programs to bring them into line with overall fiscal constraints; the realignment of public and private sector roles, for example, in pension financing and provision; improved focus on poor people; and improved incentives to work.

GLOBAL PRIORITIES

The Bank’s Europe and Central Asia region is focusing activities on a number of global priorities.

Education for All

Only Albania is currently eligible for the Fast-Track Initiative (FTI). The Bank’s analysis suggests that eight additional countries may need help in meeting the Education for All goal. Current efforts are geared toward assisting the poorest of these countries, Moldova and Tajikistan, meet criteria for FTI eligibility.

HIV/AIDS

The ECA region has the world’s fastest-growing HIV/AIDS epidemic in proportion to its population. In 2002 an estimated 250,000 new infections occurred, bringing to 1.2 million the number of people living with HIV/AIDS in the region. Thirteen countries appear to need priority attention to meet MDGs. Lending commitments were made to Russia and Ukraine, work on a project in Belarus was well advanced, and an IDA grant was made to Moldova. In addition, the Bank started an ECA HIV/AIDS Web site, and applied a demographic-economic model to assess the economic consequences of AIDS in Russia.

Maternal and Child Health

Several clients in Europe and Central Asia, including Albania, Armenia, Kosovo, Moldova, Kazakhstan, the Kyrgyz Republic, Tajikistan, and Turkey, are priority countries for the maternal and child health MDGs because of deficiencies in their policies or institutions. The Bank is working with these borrowers to help them strengthen maternal and child health programs.

Water Supply and Sanitation

The Bank’s Europe and Central Asia region has designated a first set of eight countries to be the focus of an initial set of actions to be taken to meet the MDGs related to water supply and sanitation. These countries were selected because their prospects are good for making significant progress toward meeting the goals over the next three to five years.

Trade

Country analytical support was completed or is under way for Armenia, Azerbaijan, Georgia, the Kyrgyz Republic, Moldova, Russia, and Ukraine, and regional studies were completed for the IDA-eligible countries in the Commonwealth of Independent States and for South Eastern Europe. To strengthen trade administration and promotion the Bank is implementing lending operations in Armenia and South Eastern Europe.

Investment Climate and Finance

Financial Sector Assessment Programs (FSAPs) have been completed in Bulgaria, Croatia, the Czech Republic, Estonia, Georgia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia, and follow-up technical assistance activities are under way in several of those countries. The Bank has initiated additional FSAPs in the Kyrgyz Republic, the Russian Federation, and Ukraine. In late 2002 the Bank held a regional conference on anti-money-laundering approaches.

Environmental Sustainability

The Bank supported the region’s Environment Minister’s Conference held in Kyiv, at which Bank regional strategies for water resources, biodiversity, sustainable development, and attainment of the MDGs were discussed. The Bank provided support to the PRSP process on identifying the links between environment and poverty, and completed pilot analytical work on environmental management expenditures and links between country development strategies and the environment. Projects in the Baltic Sea region, Lithuania, Kazakhstan, and Romania were added to the Bank’s Global Environment Facility portfolio, and environmental projects in Croatia, Georgia, Kazakhstan, and Romania were added to the Bank’s IBRD/IDA portfolio.

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Table 5.4: World Bank Lending to Borrowers by Theme and Sector
Figure 5.7: IBRD and IDA Lending by Theme
Figure 5.8: IBRD and IDA Lending by Sector