WASHINGTON, April 29, 2014 - The World Bank’s Board of Directors today approved a EUR150 million (US$206.8 million) Second Economic Recovery Development Policy Loan (ERDPL2) to the Republic of Croatia. The loan aims to support the Government of Croatia’s efforts in accelerating sustainable economic recovery through the consolidation of public finances and strengthening the investment climate.
Specifically, the loan supports reforms in two broad areas. The first area focuses on fiscal consolidation efforts through expenditure-based adjustments in public administration, health, pensions, and social welfare areas. These efforts will lead to improvements in the management of public spending and will strengthen the medium-term sustainability of public finances, with the goal of achieving macroeconomic stability.
The second area supported by the loan is improving the business environment and reducing state involvement in the corporate sector. The Croatian authorities have already taken measures to enhance labor market flexibility, reduce administrative and regulatory barriers for businesses, speed up the privatization of state-owned companies, and strengthen the innovation framework.
“We are encouraged that the Croatian authorities are moving forward with the structural reforms in labor, pensions, health, and social benefits, as well as in the investment climate areas. These will help reduce the fiscal deficit, stimulate job creation, productivity, and social cohesion,” said Mamta Murthi, World Bank Regional Director for Central Europe and the Baltic Countries. “We would also encourage the authorities to accelerate and deepen the reforms under the European Union’s Excessive Deficit Procedure to speed up economic recovery.”
The Euro denominated loan is a stand-alone single-tranche Development Policy Loan approved at 6-month EURIBOR plus a fixed spread, which currently translates to an interest rate of about 1.2 percent and has a 15-year bullet repayment.
Since joining the World Bank in 1993, Croatia has benefited from financial and technical assistance, policy advice, and analytical services provided by the global development institution. To date, the World Bank has supported 50 operations amounting to around US$3.3 billion, and approved 52 grants with a total value of US$70 million.