07 June 1999

  COST OF KOSOVO WAR RISING: IMF, WORLD BANK, PRODI

The economic costs of the Kosovo war on neighboring countries will exceed initial worst-case estimates, running into billions of dollars this year alone, Reuters reports international lenders said on Friday. The IMF and the World Bank said the humanitarian costs, caused by the flood of refugees out of the Yugoslav province of Kosovo, coupled with the disruption of trade in the region, would require financing of $2.2 billion for the six countries most affected: Albania, Bosnia, Bulgaria, Croatia, Macedonia and Romania.

The figure, significantly higher than the worst-case scenario estimate of $1.8 billion that the Fund and the Bank projected in late April, is based on a new scenario in which Kosovar refugees will remain in camps through the winter and trade with Yugoslavia remains closed, says the Dagens Nyheter (Sweden, 6/6). The Fund and Bank said that of the $2.2 billion needed, only $621 million has been committed to date by international lenders, the Süddeutsche Zeitung (p.24) also notes.

An IMF spokeswoman said the estimates were prepared before a peace deal was unveiled this week that US, European, and NATO officials say could bring NATO's bombing campaign to an end as early as Sunday, Reuters continues. The latest estimates exclude the cost of rebuilding Yugoslavia and Kosovo, as the international lenders cannot do business with Yugoslavia.

The New York Times (6/5, p.A1) adds that Clinton administration officials said there would be no Western assistance to rebuild Serbia until it became more democratic, and strongly suggested that Yugoslav President Slobodan Milosevic would have to be turned over for prosecution in The Hague before Serbia would be allowed access to international financial institutions like the IMF and the World Bank.

Once a peace deal is finalized, reconstruction efforts would be coordinated by the European Commission (EC) and the World Bank out of Brussels, notes the story. Such developments would require a donor meeting and decisions on who was ready to pay.

EC President Romano Prodi said on Friday the costs of reconstruction will be enormous, estimated to represent two percent of the European budget, Les Echos (p.10) reports. "We, the Commission, want to establish an authority to ensure good coordination, as the US did in Europe after the Second World War," Prodi is quoted as saying.

"Huge financial assistance is going to be needed, and it's very clear to me that Europe is committed to rebuilding south Europe," the Washington Post (6/6, p.A21) cites Rory O'Sullivan, director of the World Bank's regional headquarters in Sarajevo, Bosnia. He noted that Prodi has expressed enthusiasm for the project.

Stefan Wagstyl and Kerin Hope of the Financial Times (p.15) comment that finance alone will not be enough, as was tragically demonstrated in Bosnia. Yugoslavia collapsed into ethnic chaos even though it was the wealthiest country in Eastern Europe. Over time, communities may learn to tolerate each other. But the West must demonstrate its commitment.

Richard Stevenson writes in the NYT (6/5, p.A7) that there is a host of political, economic, and logistical problems to be overcome before any large-scale rebuilding effort can get under way. While neighboring countries like Albania and Macedonia are already receiving assistance from the World Bank and the IMF, Kosovo is technically ineligible for aid from the international financial institutions because it is not a country, and remains part of a nation, Yugoslavia, that is not a member of the IMF or World Bank.

The experience in Bosnia indicates that physical rebuilding goes much more quickly than the complex task of creating a new economy, Stevenson continues. Balkans coordinator at the World Bank, Christiaan Poortman is quoted as saying more than 90 percent of the planned road network in Bosnia is complete, more than 90 percent of a new phone system is up and running, elementary school enrollment is higher than before the conflict there, nearly three-quarters of the electrical generation system has been restored-but the country's economic output is still less than half of what it was in 1990.