Helping Regional Governments Sustain Recovery, World Bank Group Invests More Than $9.3 billion in Europe and Central Asia

Borrower demand remains above pre-crisis levels, projections for 2011–13 are for slightly stronger performance in the region

WASHINGTON, July 18, 2011—World Bank Group support to countries in the Europe and Central Asia (ECA) region totaled more than $9.3 billion in fiscal year 2011. This was double pre-crisis levels but, as planned, less than at the height of the crisis. The Bank continued to lend significant support this fiscal year to help countries sustain the nascent recovery in the region, while mitigating the impact of lingering effects of the crisis on the region’s most vulnerable.

“Countries in the region are continuing to face a challenging environment as they look to recover from the crisis,” said Philippe Le Houérou, World Bank Vice President for the Europe and Central Asia Region. “Growth resumed in Europe and Central Asia in 2010 and reached 4.5 percent, following sharp declines during the global crisis. Projections for 2011–13 are for slightly stronger performance, but remain below those for other regions.”
 
“For net importers, higher food and energy prices threaten to increase poverty, particularly in Armenia, the Kyrgyz Republic, and Tajikistan, and the continued financial concerns in Western Europe provides added uncertainty,” Le Houérou added. “The World Bank remains committed to supporting the countries in the region as they continue to recover from the crisis and take the necessary steps to improve the lives of their citizens.”
 
World Bank (IBRD and IDA) commitments in the region reached $6.15 billion in FY11, including $5.5 billion from IBRD and $650 million from IDA. Turkey ($1.4 billion), Romania ($1.1 billion), and Poland ($1.1 billion) were the largest borrowers. Lending this fiscal year focused on helping client countries take steps to enhance their competitiveness coming out of the crisis, mitigating the lingering effects of the crisis on the poorest in the region, and assisting countries in the region take steps to prepare for, and adapt to, climate change.

• Improving Competitiveness – To help countries increase their competitiveness, improve productivity, and strengthen regional integration, the Bank supported regulatory reforms and public finance management in Poland and Croatia; helped stabilize the financial sector in Georgia and Serbia; and increased access to finance for small- and medium-size enterprises in Armenia and Turkey. It supported road improvements in Belarus, Kazakhstan, Kyrgyz Republic, and the South Caucasus, and public sector reforms to improve governance and the delivery of transport and energy in Romania.
  
  For the eighth year in a row, Europe and Central Asia led the world in improving business regulation for domestic firms, according to Doing Business 2011. Twenty-one countries in the region improved their ranking. The Bank continues to work with client countries to identify their policy priorities, develop plans for recovery, improve the investment climate, and diversify exports, all with a view to creating jobs which is key for improving peoples’ lives in the region.

• Supporting Social Sector Reforms and Fiscal Adjustment – The Bank continues to work with governments in Europe and Central Asia to improve the efficiency of social spending, in order to better protect the poor by improving cash transfers, social pensions, and targeted anti-poverty programs.
  
  Bank financing to strengthen safety nets included results-based investment loans to Moldova and Romania and Rapid Social Response and IDA grants to Tajikistan, a social safety net and employment services project in Bosnia and Herzegovina, and pension reforms in Romania and other countries in the region.
  
  The Bank is supporting the improvement in Government finances in more than a dozen countries. This helped protect spending on social assistance programs in Albania, Latvia, and Romania, as well as vital public services, including education quality in Kazakhstan and the Russian Federation, and healthcare in Armenia, Bosnia and Herzegovina, Tajikistan, and Uzbekistan.

• Mitigating and Adapting to Climate Change – The lingering legacy of environmental mismanagement and the region’s energy-intensive production have left it ill-prepared to adapt to the negative impact of climate change. Many countries are suffering from unusually severe floods and droughts, and the number of extreme events—droughts, floods, heat waves, windstorms, and forest fires—is likely to increase in the coming decades.
  
  The Bank is supporting efforts to mitigate carbon emissions, build countries’ climate change knowledge base, and assess consequences and adaptation approaches. It is financing energy efficiency projects in Belarus, Poland, Turkey, and Ukraine, and development policy lending in Poland. The Bank is working with FYR Macedonia, Poland, Russia, and Ukraine on national energy efficiency strategies.

The International Finance Corporation (IFC) this year continued to maintain a focus on investing in strategic areas. In FY11, IFC committed $2.1 billion including $500 million in syndicated loans, in 81 projects across the region.

“Over the past year IFC continued to support economic recovery in Europe and Central Asia with a focus on the least developed countries and regions to ensure inclusive development,” said Snezana Stoiljkovic, IFC Director for Europe and Central Asia. “We introduced new financial products and advisory services to expand access to finance for businesses and individuals, improve infrastructure, boost the agribusiness and manufacturing sectors, and promote cleaner production and technologies."
 
The Multilateral Investment Guarantee Agency (MIGA), meanwhile, in FY11 provided support for 16 projects with $1.1 billion in political risk insurance coverage in the region. MIGA continued its support to the financial sector in Europe and Central Asia, in particular through guarantees issued to ProCredit Holding of Germany—a provider of credit and other banking services to very small, small, and medium-size enterprises in transition economies and developing countries. MIGA also supported telecommunications projects in Poland and the Russian Federation and gave robust support to infrastructure projects in Turkey.
 
“MIGA remains committed to helping the economies of Europe and Central Asia return to pre-crisis levels—and even underpin the next level of growth through sound foreign direct investment," said Izumi Kobayashi, MIGA's Executive Vice President.