World Bank Helps Serbia Improve Health Care System and Strengthen Confidence in the Financial System

February 25, 2014

  • Piloting centralized procurement for one-third of drugs used in Serbia has already saved 25 million Euros
  • Strengthening the Deposit Insurance Agency will help to build a stronger financial sector in Serbia – critical for job creation and growth in the country

WASHINGTON, February 25, 2014 — The World Bank’s Board of Directors today approved the Second Serbia Health Project of US$40 million and the Deposit Insurance Strengthening Project of US$200 million for Serbia. The Second Serbia Health Project aims at improving the efficiency and the quality of Serbia’s public health care system, while the Deposit Insurance Strengthening Project aims to strengthen the financial and institutional capacity of the Deposit Insurance Agency (DIA).

The entire population of the country will benefit from these two projects as they address systemic deficiencies in their respective sectors.

Second Serbia Health Project

Total health spending in Serbia accounts for about 10.4 percent of GDP. It is critical for Serbia to increase the productivity of its health spending, particularly given an environment of fiscal constraints and increasing demands for health care from an ageing population. To address these issues, the Second Serbia Health Project will support the improvement of health care financing and efficient purchasing of pharmaceuticals and medical products.   

We already have proof that such interventions will improve the efficiency of the Serbian health care system,” says Tony Verheijen, World Bank Country Manager for Serbia. “Centralized procurement was piloted during the preparation of the project for one-third of the drugs used in the public health care system. It reduced the cost by 25 million Euros for 2014. Lower-income groups will benefit from this efficiency as they cannot opt out of the public health care system. Cost savings should contribute to ensuring that public funds deliver a maximum level of service for everyone.

In addition, the project aims to improve the standards of quality and efficiency of care in the Serbian health sector through two main approaches: (i) strengthening quality improvement systems; and (ii) modernizing cancer management at selected tertiary facilities.

One of the major issues – and is an increasing problem – in Serbia are malignant diseases. New equipment financed by the project will improve radio therapy for those patients,” says Timothy Johnston, Sector Leader for Health and Nutrition in the World Bank’s Europe and Central Asia region. “Improving standardized screening and treatment procedures for cancer and cardiovascular diseases, and improving health care institutions should give incentives for better quality health care services.”    

Deposit Insurance Strengthening Project

The Deposit Insurance Fund of Serbia was depleted by several recent bank failures. The Deposit Insurance Fund covers depositors in Serbia of up to 50,000 Euros in the case of a bank failure. The depletion of the Deposit Insurance Fund creates risks to the Serbian financial system due to the possibility of it not having adequate resources to cover insured depositors. Bank failures, even of a small size, have the potential to shake confidence in the entire banking system if depositors lose confidence in the security of their deposits.

Ensuring confidence and continuing to develop the financial sector in Serbia is a critical part of the agenda of ensuring shared prosperity in Serbia. Access to credit remains a major issue in Serbia as credit growth continues to be much lower than prior to the 2008 global financial crisis. Research has shown that increasing confidence in a financial system can lead to an increase in the amount of domestic savings that can be mobilized for more productive uses, which, in turn, can lead to increased growth and job creation.

US$200 million will be allocated to replenish the Deposit Insurance Fund,” says Tony Verheijen. “In parallel with other measures that increase financial resources from other sources, this will ensure that the Deposit Insurance Fund has the resources to meet its legally mandated deposit insurance and bank resolution functions. This will strengthen confidence in the financial system and contribute to increasing the amount of savings that can be mobilized for job creation and growth in the country.”

Significant support is also provided to strengthen the institutional and technical capacity of the Deposit Insurance Agency. In addition, a unique aspect of the project is that disbursements of financing for the Deposit Insurance Fund are linked to the achievement of measurable outcomes.

“The project will benefit all households as well as small- and medium-enterprises in Serbia that have deposits in the banking system,” says Rinku Chandra, Senior Financial Sector Development Specialist in the World Bank’s Europe and Central Asia region. “The government has also demonstrated a strong commitment to a broader financial sector reform program, and this project is a key part of the World Bank’s assistance to the government in achieving their objectives.”

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