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East Europe/Central Asia: World Bank Lends Record Amount To Region

Washington, 16 July 1998 (RFE/RL) -- The nations of Central and Eastern Europe and Central Asia received World Bank loan commitments of $5.22 billion in the fiscal year which ended June 30 -- a 2.3 percent increase over the previous year.

In its first report on the 1998 financial year, the bank says the five largest borrowers in the region were Russia, Poland, Turkey, Kazakhstan, and Ukraine. Russia was the fifth largest borrower from the bank overall in 1998, getting commitments of $1.628 billion. The bank includes Turkey along with all the former communist countries in its regional grouping.

The World Bank says that it has committed $32.8 billion in loans to the region since 1990. In 1998, the bank itself supported 35 projects worth $4.46 billion while it's International Development Association (IDA), the arm for the poorest nations, backed 34 projects with $762 million in credits. World Bank loans charge standard market interest rates while IDA credits carry no interest charges but require the payment of only a small annual fee. The commitments are not the amount of money actually disbursed. Most loans are for several years and are paid out over that time.

The bank's Vice President for Europe and Central Asia, Johannes Linn, says in the report that the region saw further economic growth in the 1998 fiscal year. But, he says, most of these countries have begun facing what he calls "a second set of transition issues" -- shifting their focus from short-term stabilization to long-term development.

After focusing on immediate stability and reducing budget deficits, he says, many of these countries must now deal with improving the composition of public expenditures, creating effective and fair tax systems, improving the prudential regulation and supervision of financial systems, enhancing the involvement of private investors -- particularly in infrastructure and energy -- and improving pension systems.

Linn says effective implementation of all these measures is "vital" for ensuring the sustainability of reforms and limiting the region's vulnerability to financial havoc, such as the Asian crisis.

Linn says accelerating privatization and financial sector reform continues to be a priority for the entire region. He notes that adjustment loans were made to support small-scale privatization in Bosnia, Moldova and Tajikistan during the fiscal year. Loans aimed to speed up privatization of medium and large scale enterprises were made to Armenia, Azerbaijan, Georgia and Russia, he says.

The bank says it also put emphasis in 1998 on helping countries meet the needs of those most affected by economic transition by strengthening social safety nets. It points especially to Russia where the second coal sector loan focuses on helping coal workers, their families and communities.

The bank also supported health sector reform in Armenia, Turkmenistan, and Uzbekistan.

The bank says one of its major activities in some countries during the year was the support of what it calls "post-conflict reconstruction" loans. Two loans were made to Bosnia to rebuild agriculture, education, electric power, housing, transport and water supplies following the war. In Tajikistan, IDA provided three credits to support economic recovery following the formal end of the country's civil war.

The World Bank also says it provided broad assistance to the ten countries in the region invited to begin negotiations to join the European Union. Bank technical staff helped Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia to prepare for their accession talks.