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News Release No: 2000/250/ECA
Contact Person: Gina Ciagne (202) 458-4166

Email: Gciagne@worldbank.org

PRISTINA, March 21, 2000 - The World Bank and the United Nations Interim Administration in Kosovo (UNMIK) yesterday signed a US$5 million Economic Assistance Grant for Kosovo that will support the province's economic reform program through providing financial resources to UNMIK for the Kosovo budget. The grant will be disbursed out of the World Bank Trust Fund set up for the benefit of the province in FY2000, and the proceeds will be used for salary payments and other budgetary expenditures.

The reforms will include the provision of essential public services in the aftermath of conflict; the establishment of key public institutions; and the adoption of clear governance policies as well as policies facilitating the transition to a private market- based economy. Two elements of UNMIK's reform program being supported by this grant are:

• The creation of a fully functioning and effective budget management system within the interim government of Kosovo (the Central Fiscal Agency), with modern standards of public expenditure management, transparent fiscal operations and, accounting and audit; and
• The establishment of a fully functioning and effective bank licensing and supervision capability within the Banking and Payments Authority, with a view to stimulating banking activities in a safe and sound manner on local participation.

In order to ensure continuance and sustainability when UNMIK withdraws from Kosovo and local representative authorities take place, utmost importance was placed in the design of policies and institutions. Local Kosovar experts and political leaders were consulted in policy and institution formulations in the areas indicated above, and Kosovar experts play a prominent management and administrative role in the functioning of these bodies.

The chief benefits of the grant will be to ensure effective budget management, thereby contributing to the probity of use of public funds obtained both through local taxation and international donor support for the recurrent budget; and to lay the foundations for an efficient and sound banking system, thereby promoting local savings and their intermediation for private investment purposes.

The grant will be disbursed as a single tranche.

WORLD BANK STRATEGY FOR KOSOVO

The World Bank strategy to assist Kosovo in its reconstruction and recovery effort includes jump-starting economic activity amidst the aftermath of the recent conflict and a decade of neglect. The Bank's strategy also aims to maximize its impact in Kosovo by using its comparative advantage in policy advice, institution building, and aid coordination to help ensure the overall sustainability of the reconstruction and recovery effort. Total World Bank assistance to Kosovo is expected to amount to US$50-60 million over the next 18 months.

Through the creation of a Special Trust Fund for Kosovo, financed from World Bank net income, the Bank intends to support several operations from the first US$25 million tranche. These include: (1) the just-signed economic assistance grant; (2) an agriculture restart operation that will enable farmers to begin the 2000 spring season with sufficient inputs to produce incomes and reduce food aid dependence; and (3) a credit line to help support the dynamic small and medium-sized private enterprises that may help lead Kosovo's economic recovery. Additional activities in the energy, water and waste, and social sectors will also be supported. A second tranche amounting to US$25-30 million will likely be made available in the next fiscal year.

Financing has also been made available from the Bank's Special Post-Conflict Trust Fund for two additional projects, including an earlier Economic Assistance Grant and the Community Development Fund Project.

For more on the World Bank's role in Economic Reconstruction and Development in Kosovo and South East Europe, visit the joint World Bank/European Commission website at http://www.seerecon.org .