Serb highway races ahead with $388m World Bank loan(5)

The World Bank is extending a major loan to the government of Serbia to begin construction of parts of a motorway connecting the country with two of its neighbours.

The World Bank has agreed to underwrite part of a new motorway for Serbia.

The $388 million loan has been provided for a term of 20 years, according to reports, though no repayments will be required in the first eight years.

Part of the motorway sections being constructed are designed to link Serbia with Hungary to the north and Macedonia to the south.

According to reports, the Serbian government must next sanction the facility.Deputy prime minister, Mladjan Dinkic, told local media that the country was also in the process of negotiating loans with other banks of up to €850 million in total. That will help finance the cost of building more complicated sections of the road.

The World Bank has been supporting Serbia’s efforts to modernize infrastructure since the new government introduced reforms in 2001. The bank reports on its website that Serbia has made “significant progress” since 2000 with macro-economic stability having been restored amid rising incomes and GDP per capita. However, the economy shrank by 3.5 percent in the first quarter of this year.

The key economic priorities of the Serb government are set out in the country’s Memorandum on the Budget and Economic and Fiscal Policy for the Year and are aimed at maintaining macroeconomic stability, economic growth through economic reforms, increased employment and living standards, and a more balanced regional development.

Serbia is not yet part of the European Union. However, EU foreign policy chief Javier Solana was in Belgrade yesterday trying to keep relations warm.

Last year the EU signed a ‘stabilization and association agreement’ with Serbia which is required as a key step along the way to full integration, however this was suspended over a row to do with bringing Serb war criminals to justice.

News of the loan to Serbia follows close on the heels of a $270 million facility for Brazil to help finance major infrastructure projects. On 9 July, the bank said it had granted a $166 million loan to The São Paulo State Feeder Road Project which should improve the efficiency of the paved municipal road network and $104 million to the Integrated Water Management Project in Metropolitan São Paulo.