World Bank to Lend Serbia $490 Million After New Laws Approved

The World Bank will lend Serbia $490 million as early as March if the Balkan country approves laws on state-asset sales, bankruptcy proceedings and construction permits by the end of the year.

The Washington-based lender will probably discuss assistance to Serbia on Feb. 27 if the regulations are introduced, its resident representative in Belgrade, Tony Verheijen, told reporters today. Depending on the pace of reforms, the World Bank may also approve an additional loan of $300 million.

The country also needs to approve a new labor code to help lower unemployment, which has climbed for a fifth consecutive year to 24.1 percent in June, according to the finance ministry’s latest data.

“The overall package” of laws is “critical if Serbia is to perform better and boost employment,” Verheijen said. The government also needs to step up efforts to improve companies’ access to loans.

Serbia’s economic growth will probably slow to 1 percent in 2014 from this year’s forecast of 2 percent, the World Bank said.

In 2014, the government may receive $250 million in direct budget support for initiating reforms, selling or closing 153 enterprises that have cost Serbia an estimated 750 million euros a year ($1.1 billion). A further $200 million is designed to help Serbia improve banking supervision, including funds to boost capital of the Deposit Insurance Agency, with remaining $50 million destined for the health sector, he said.

Prime Minister Ivica Dacic’s cabinet is looking for investors to sell state enterprises and may find “solutions that don’t involve job losses,” Verheijen said.

“We certainly don’t expect 30,000 people to lose jobs as Serbia wouldn’t be able to bear that,” he said.

To contact the reporter on this story: Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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