Contacts: In Pristina: Neil Bush (381 38) 249 459 nbush@worldbank.org In Washington: Miriam Van Dyck (202) 458 2931 mvandyck@worldbank.org WASHINGTON, March 29, 2006--The World Bank’s Board of Executive Directors today discussed a new Interim Strategy for Kosovo. This strategy, spanning Fiscal Years 2006 and 2007, envisages around US$19 million in grant funding for Kosovo. In countries emerging from conflict, the World Bank prepares an Interim Strategy Note in partnership with other donors in order to plan for resource mobilization and action. The key priorities of the new strategy are to help Kosovo generate new and sustainable sources of economic growth, address environmental legacy issues and to ensure macroeconomic stability. “The World Bank is working in Kosovo to help build the economy, improve the investment climate, promote good governance, and protect the environment – and the new Interim Strategy is an important tool in this process,” said World Bank Director for South East Europe Orsalia Kalantzopoulos. “These improvements will help better the lives of all of Kosovo’s citizens.” Kosovo is entering a decisive phase in its history as discussions on resolving its final political status begin. This is happening as domestic governmental institutions assume more responsibilities from the United Nations and as the Western Balkans region continues its integration with the European Union. Against this backdrop, Kosovo continues to move from a post-conflict environment to a development setting, creating new challenges. A substantial reconstruction effort immediately following the 1999 conflict led to a rebound in economic activity and notable improvements in physical infrastructure. More recently, however, donor resources have declined, economic growth has weakened and the fiscal position has deteriorated. Alongside, poverty is widespread, affecting 37 percent of the population, unemployment is estimated at some 40 percent and public health is affected by environmental pollution and contamination. There are also pervasive governance problems. To help overcome the above economic and social challenges, two central themes are addressed in the strategy: Generating new sources of economic growth and ensuring associated environmental and social improvements. The energy and mining sectors have been identified as key to future growth; abundant mineral deposits (particularly lignite) create potential for Kosovo to attract strategic foreign investors to export power to the region and to supply domestic demand. Developing this potential will provide Kosovo with: (i) a substantial long-term source of income to pay for priority development programs and much-needed social services; (ii) an opportunity to boost trade links within Southeast Europe; and (iii) greater stability and predictability of power supply. In this context, the Kosovar Authorities have asked the Bank (through a $8.5 million Lignite Power Technical Assistance Project) to support the development of Kosovo’s lignite mining and power generation sector, by helping develop an enabling framework for private sector participation. This will include ensuring the sector is developed in an environmentally and socially sustainable manner and in a transparent fashion. Through a $5.5 million Clean-Up and Land Reclamation Project, the Bank will also address a specific environmental legacy issue, by assisting the authorities in reclaiming lands covered by ash piles. Ensuring macroeconomic stability through sound fiscal policy and public financial management. The sudden swing in fiscal policy in 2004, which increased the budget deficit to unsustainable levels (5.4 percent of GDP), needs to be reversed through concerted efforts over several years. Kosovo’s limited fiscal financing options, and future pressures for new spending (including related to resolution of its political status), heighten the need for fiscal adjustment. While in the longer-term, there is a need to generate new sources of fiscal and export revenues, in the short-term, fiscal adjustment will need to primarily come from further rationalization and better planning of public spending. Through a $5 million Fiscal Policy Support Grant, requested by the Kosovo authorities, the World Bank will support fiscal adjustment efforts, including helping improve public expenditure management and assuring that appropriate resources are allocated to poverty reduction priorities. The new strategy builds upon the previous work of the World Bank in Kosovo. Since FY2000, the Bank has approved 22 grants totaling $95 million to Kosovo. The Bank is currently operating in the business environment, public expenditure management, energy and mining, education, community development and youth sectors. The strategy for Kosovo was developed in cooperation with the European Commission and other donors. It is expected to continue until the end of Fiscal Year 2007. -###- For more information on the Interim Strategy for Kosovo, please visit the the Strategy Note For more information on the World Bank’s work in Kosovo, please visit http://www.worldbank.org/kosovo |
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