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Yugoslavia: Effort To Aid Kosovo Neighbors Gears Up

Washington, 29 April 1999 (RFE/RL) -- The international community has now shifted into gear a broad ranging effort to come up with the money to help the nations hardest hit by the Kosovo crisis.

World Bank Vice President for Europe and Central Asia, Johannes Linn, announced that a donor conference to raise money for Macedonia will be held May 5 in Paris along with a region-wide coordinating meeting for longer-term planning on financing the costs of the crisis.

Linn said that donor conferences for Albania and Bosnia will be scheduled later in May. Others, such as Romania, Bulgaria and Croatia, will be kept under consideration if the need arises.

Linn said that a special meeting called by the bank and the International Monetary Fund (IMF) Tuesday night brought together 33 nations -- the six most affected neighbors, Albania, Macedonia, Bosnia, Bulgaria, Romania and Croatia -- and 27 potential donor nations to discuss what the costs may be and how to organize the global financing effort.

Russia sent two representatives to the meeting but they did not take speak.

The bank and the fund came up with some preliminary estimates of costs to front-line countries -- not counting refugee costs nor those for eventual reconstruction of Yugoslavia -- of at least $2 billion.

But officials of the neighboring countries said those are way too low. Bulgaria's Deputy Finance Minister Dimitar Radev said the costs to his country alone could be well more than $400 million this year, costs that will have severe effects on the Bulgarian economy.

Still, he said, Sofia is not complaining and has provided humanitarian aid already of over 300 million euros.

But to survive and keep its economic reform program on track, Radev said Bulgaria will need outside financial help of between $300 million and $400 million. He also suggested that Bulgaria's creditors in the Paris club agree to swap the $400 million in debt and interest payments Sofia must pay over the next two years for equity investments that could be put to work in Bulgaria now.

Linn told a press conference Wednesday that the main thing the meeting came up with was a decision to deal with the problems on two levels -- on a country by country basis addressing specific needs and on a broader regional level for both short and long term:

Linn said: "One will want to think about how regional integration and cooperation can be fostered through various mechanisms, whether its infrastructure which links countries and peoples in the region, or institutional mechanisms (which) get into economic, business and civil society sphere, or just facilitation of trade."

In addition to specific emergency and longer term loans for all the affected countries, Linn says the bank is working on a Regional Transportation loan program to support the facilitation of cross-border trade:

Linn said: "Even forgetting the current difficulties, cross-border trade has been impeded because of lack of information flow across countries as regards the simple movement of trucks and their contents. The lack of proper border crossings, inappropriate customs procedures and lack of effective institutions, corruption, of course, at the border, etc. etc." The loan, expected to be approved this summer, will at first include Albania, Macedonia and Bosnia, but may soon be expanded to include Croatia, Romania and Bulgaria.

Linn says that in the meeting with the affected states, it became clear how deeply the effects can go into a country: Linn said: "If a business loses 20% of its exports and trade opportunities, that may be the difference between staying in business and going out of business. And then of course the impact of unemployment on the economy as a whole can be much larger than just the 20 percent of trade which we have initially focused on. So there are dynamic effects and threshold effects which can make, as this works through the economies, the impact on the economies (with) unemployment, ultimately then the impact on the budget and balance of payments (is) more severe."

Michael Deppler, the head of the IMF's European one Department, which covers East and Central European nations NOT from the former Soviet Union, said that the really huge bills in the future will be for reconstruction of the entire region:

Deppler said: "We have to have peace before we can think reconstruction. In terms of the refugee costs, my sense is the support there is tremendous. One of the purposes of our analysis was to bring out that economic disruption is costly. These numbers may seem low, but ...the effect on output in the countries affected is 5% of GDP. Now that is not a trivial economic impact. So the indirect effects of this crisis are quite severe."

Still, Deppler said that longer term -- once peace is restored -- the cost estimates may decline because there will be positive effects:

Deppler said: "We're seeing a large negative effect right now, but if the war is over soon, you could see a substantial reversal of these negative effects. Indeed, for a country like Romania, depending on what happens to Yugoslavia, there will be significant positive effects because the reconstruction will be a net boom for Romania in the next phase.

"So it's a very dynamic process. What the needs are at this juncture, it's just too early to conjecture about what happens, with the politics, to be thinking these things through in any detail."

The European Union (EU), which with the bank is handling the broad coordination of financial assistance for the front-line states, has called another meeting of donor nations in Bonn for the end of May to further develop the coordinating mechanism.