February 27, 2006—This week the Czech Republic will officially celebrate its change in status with the World Bank - from a borrower to a donor. The graduation ceremony, marking the Czech Republic’s extraordinary transformation from a planned to market economy, will take place in Prague on Tuesday. World Bank Group President Paul Wolfowitz will attend. It is his first visit to the country since taking over presidency of the Bank Group last year. After 15 years of reform, the Czech Republic no longer needs the resources of the World Bank’s International Bank for Reconstruction and Development (IBRD), the lending arm which focuses on middle income and credit-worthy poor countries. Thus the term ‘graduation’. As Shigeo Katsu, the Bank’s Vice President for the Europe and Central Asia region, acknowledges, “The Czech Republic is among the successful middle income economies that constitute the new generation of development partners. The country can play an important role in advancing global development priorities. It is also showing the way forward in developing a new international financial framework. International Financial Architecture, or IFA, was developed in the wake of the East Asian financial crisis of the late 1990s and refers to a method whereby the international community undertakes diagnostic work on national financial systems which allow for tailored policy advice.  |  |  | | Shigeo Katsu, the Bank’s Vice President for the Europe and Central Asia region |
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Toward A Partnership of Equals The World Bank-Czech Republic relationship has focused more on partnering than on borrowing. From about 1998 onwards, the Bank’s involvement was mainly in the form of analytical and advisory services. The Bank supported the country’s EU accession process, capital and financial market reform, enterprise restructuring and fiscal management improvement. Assistance was provided for corporate governance, the regulatory framework, pension reform and the energy and environment sectors. “Having overcome a banking sector crisis in 1997-1999, the Government drew the right conclusions and embarked on targeted structural reforms. Relations between the Bank and the Czech Republic intensified during this period and we supported the authorities as they started to grapple with off-budget contingent liabilities,” explained Katsu. The country then turned its energies toward preparing for EU accession, which happened in May 2004. That stage of reform focused on public expenditure management, with Bank assistance taking the form of a Country Economic Memorandum and a Public Expenditure Review. Cutting edge financial sector reforms A third phase of reforms focused on the Czech authorities’ desire to be in the forefront of financial sector reforms and assist the Bank’s development of innovative work on standards and codes. In the spirit of continued collaboration on IFA, Mr. Wolfowitz will speak in Prague at a forum on “Institutional Foundations for Sound Finance.” The forum is attracting high level financial sector regulators, supervisors, and policy makers from more than 20 countries. “The Czech Republic is the first country to assess all standards related to the so-called International Financial Architecture,” explained Cesare Calari, World Bank Financial Sector Vice President.
“We are grateful to policymakers in the Czech Republic for testing these diagnostic instruments so they can be rolled out in other countries,” added Calari, whose team organized the forum together with the Czech Government. Looking Ahead With a Gross National Income of just over US$9,000 and with steady economic growth, the Czech Republic now faces such remaining challenges as pension and health care reform, developing Public-Private Partnerships for infrastructure, and working on consumer protection in the financial market. |
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