In a first for Serbia, special Bank policy instrument will help the country access up to US$400 Million in credit from global lenders and increase its experience in dealing with global markets
WASHINGTON, February 10, 2011 - The World Bank Board of Directors today approved the Private and Financial Sector Policy Based Guarantee (PFSPBG) of up to EURO 300 million (not to exceed the equivalent of USD 400 million) for Serbia. This operation helps Serbia access international markets at lower costs and longer maturity, and it also supports improving the business environment, strengthening financial discipline in non-private enterprise sector, and building a stable and more efficient financial sector.
“Serbia has never accessed international markets independently. Thanks to this policy based guarantee, eight global banks have had an opportunity to do a due diligence on Serbia, and the Serbian Debt Management Authority has had a chance to get familiar with the legal requirements of international tenders and global banks,” says Jane Armitage, the World Bank Country Director and Regional Coordinator for South-East Europe. “Furthermore, the Government has been able to reduce the cost of borrowing and double the maturity of its debt.”
The guarantee and underlying loan has been designed in a way that will enable the Government of Serbia to re-finance obligations coming due at reduced cost. This should further strengthen Serbia’s debt profile.
The PFSPBG encourages continuation of the reforms supported under the two previous private and financial sector development policy loans. The objectives of the PFSPBG are to improve the business environment, strengthen financial discipline in the non-private enterprise sector, and build a stable and more efficient financial sector.
“This policy based guarantee further advances Serbia’s strong track-record in structural reforms. The guarantee supports policies to improve the business environment, such as reducing compliance costs and making enforcement of court decisions faster and cheaper, and also to facilitate the resolution of unviable socially owned enterprises,” says Aurora Ferrari, Senior Private Sector Development Specialist and Task Team Leader. “Moreover, recently introduced legal amendments allow the authorities to resolve banks faster, at a lower cost, while still protecting depositors.”
The Policy Based Guarantee is issued by the International Bank for Reconstruction and Development (IBRD). The guarantee will cover the principal amount of a commercial bank borrowing of up to EUR 300 million, not exceeding the equivalent of US$400 million, with a 6-year bullet maturity on a non-accelerable basis.