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 Press release - Rebuilding Kosovo Moves Ahead; Long-term Challenges Remain (WB)

 Press release date: 27.09.1999

The World Bank
News Release No. 2000/058/ECA

World Bank Contacts: Gina Ciagne (202) 458-4166
Cell (202) 422-7654
Phillip Hay (202) 473-1796
Cell (240) 876-1126
European Commission Contact: Willy Helin (202) 862-9530
Cell (202) 487-5011

High Level Steering Group Meets to Review Progress

WASHINGTON, September 28, 1999 - The process of rebuilding Kosovo is making progress, but international policy makers attending the second High-Level Steering Group for Southeast Europe, convening in Washington, DC at the IMF/World Bank Annual Meetings, heard that substantial challenges still lie ahead as the UN Mission in Kosovo (UNMIK) works out how to resolve short-term humanitarian issues as well as longer-term reconstruction needs.

Under the joint chairmanship of European Commissioner for Economic and Monetary Affairs, Pedro Solbes Mira, and World Bank President, James D. Wolfensohn, the High Level Steering Group today welcomed the progress being made by UNMIK in laying the foundation for a sound market economy and in preparing a budget for Kosovo for the rest of 1999 and 2000. However, the Group also called on international donors to disburse the money they had previously pledged for both budgetary support, and humanitarian aid in time for the onset of the Balkan winter.

In addition, mindful of the need to protect both domestic revenues as well as external donor support from corruption or misappropriation, the Group also welcomed the setting up of strict financial and auditing controls to ensure that all transactions involving the Kosovo budget are transparent and fully accountable.

The Group, which was set up to guide the donor coordination process for the economic reconstruction, stabilization, reform, and development of the Southeast Europe Region after the recent Cologne Summit, encouraged UNMIK to create the right business conditions to attract private investment and, more broadly, accelerate the process of transforming Kosovo into a modern market economy. "It is essential that the next Kosovo Donors Conference is fully successful, in particular, in helping to fund a real operational budget for Kosovo," EU-Commissioner Solbes said.

Prospects and Needs of Southeast Europe

The Group reviewed the economic consequences of the recent hostilities in Kosovo, which caused major setbacks for the economies of Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the former Yugoslav Republic of Macedonia, and Romania. Although the rapid return home of Kosovar refugees after the end of the hostilities brought considerable financial relief for those countries which had offered them shelter, many of these regional economies still face continuing disruption in investment, tourism, trade, and transit routes around the Federal Republic of Yugoslavia (FRY). As a result, in many countries, economic reform and transition programs have come under considerable pressure.

At the first High Level Steering Group meeting in Brussels in July 1999, participants had expressed concern about the 1999 balance of payment situation in the six most affected countries in Southeast Europe. However, at the meeting today, the Group said it was pleased to see that their budgetary needs have been largely filled as a result of adjustment efforts by most countries and extra international donors assistance.

In 2000, the IMF projects a substantial residual balance of payments gap for the six countries, arising from the need to fund renewed reform and adjustment efforts, as well as mitigating the remaining impact of the Kosovo crisis.

Interaction with the Stability Pact

The Group welcomed the successful launching of the Stability Pact at the Summit Meeting in Sarajevo at the end of July, and the various announcements made with respect to special economic and financial assistance to the region.

I am particularly pleased that we have been able to accomplish all of this in true partnership, said World Bank Group President James D. Wolfensohn. We face extremely complex challenges in our work on the Balkans and there is no chance for success without such partnerships.

The Group noted that close coordination between the activities undertaken by the Stability Pact and its Working Tables, in particular the Table on Economic Reconstruction, Development and Cooperation, and the initiatives of the High Level Steering Group is essential.

For their part, the World Bank and the European Commission will continue to organize donor coordination meetings to mobilize appropriate financing. However, continued economic reform and domestic adjustment by the countries in the Region will be essential to lay the foundation for an efficient transformation to a market economy.

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