World Bank Approves Credit to Assist Albania During Kosovo Crisis. World Bank Group, (06 May 1999)

Source: http://www.worldbank.org/html/extdr/extme/2171.htm
Accessed 11 May 1999

WORLD BANK APPROVES CREDIT TO ASSIST ALBANIA DURING KOSOVO CRISIS

WASHINGTON, May 6, 1999 — The World Bank today approved a US$30 million equivalent (SDR22.1 million) Public Expenditure Support Credit for Albania, to help the country counter the economic effects of the crisis in neighboring Kosovo.

This project will:

Help safeguard Albania's functioning public institutions during this period of crisis so that the adopted reform agenda can be maintained;
Maintain macroeconomic stabilization during a period where serious shocks will affect orderly economic activities, put exceptional demands on public expenditures, while reducing possibilities for revenue collection;
Help monitor and enforce an orderly public expenditure pattern during an emergency;
Establish a vehicle for co-financing and parallel financing for other donors willing to provide support to Albania in support of the above objectives.

The credit will provide quick-disbursing budget support to allow the Government to resume critical public expenditures which were frozen to allow for the unbudgeted expenditures incurred as a result of the massive inflow of refugees since March 1999, and to help alleviate the budgetary pressure as a consequence of increased demands on the Albanian Government and of revenue losses which will result from the continuing crisis.

The budget support provided by the credit will disburse through the Public Expenditure Support Program (PESP) set up in response to the crisis. The PESP will serve to monitor and enforce a priority public expenditure pattern during the crisis period to prevent backsliding in the structural reform effort and to reduce any adverse impact on critical services, such as health care, education and maintaining internal security, and growth. The PESP also contains a strong set of measures to improve transparency in public expenditure management and aid distribution during the crisis.

The credit will be disbursed on standard IDA terms, with a 40-year maturity, including a 10-year grace period. Since Albania joined the World Bank in 1991, commitments total approximately US$395.8 million for 30 projects.

World Bank Response to Albania

The World Bank's response to the emerging crisis is closely coordinated with the IMF in the context of the two institutions' effort to coordinate the financial response of the international community to the Kosovo crisis. On April 2, the World Bank sponsored an emergency Informal Donors' Meeting on the Kosovo crisis where international financial institutions and bilateral participants, including representatives from the affected countries, exchanged views on the immediate impact of the crisis on the countries in the region and on on-going and planned donor support programs. A follow-up coordination meeting for the relevant international financial institutions was held in London on April 18. IMF and Bank staff produced a joint paper containing a preliminary assessment of the external financing needs as a consequence of the Kosovo crisis. In line with the approach outlined in this paper, the Bank is following a three-part strategy to help Albania to respond to this crisis. It consists of:

Immediate assistance through budget support provided under the proposed Public Expenditure Support Credit.
Reallocation of uncommitted funds of selected ongoing operations to redirect project activities to areas and infrastructure needs most affected by refugees. Investments within the scope of these projects will likely strengthen infrastructure programs to withstand the substantial additional demand created by the massive inflow of refugees. Infrastructure in the social sectors, especially primary health facilities, school buildings and water and sanitation systems will need to be repaired and expanded under this situation.
Special support to refugees provided from the Post-Conflict Fund. In 1998, the Bank's Post- Conflict Fund approved a US$1 million grant in support of the 18,000 refugees which arrived in mid 1998. This grant is being implemented very successfully by an international NGO. Agreement has been reached that all remaining funds be utilized in the border areas where refugees from Kosovo arrive. An additional allocation of US$1 million was approved on April 5, 1999. This allocation will be used to broaden the program, including the involvement of several NGOs.

By providing urgent budgetary support as well as assistance under ongoing investment operations, the World Bank can assist in maintaining the functioning of the public sector, essential for assuring internal security and social peace. Budgetary support will help contribute to continued macro-stabilization which is essential so that the successful reform momentum in governance and state building, private sector development, and poverty alleviation can be maintained.