High level officials from 41 donor countries and 19 international organizations meeting in Brussels today for a Donor Coordination Meeting for the Federal Republic of Yugoslavia (FRY), heard from UN and government experts about the current urgent needs of the FRY economy. These needs focus on several key areas - with the first priorities being energy, health and social protection. This meeting was convened by the European Commission and the World Bank in the context of their overall donor coordination responsibilities for Southeast Europe.

Participants welcomed this first international donor meeting for FRY since the important changes of government two months ago. The meeting was co-chaired by Ms. Catherine Day, Deputy Director General, European Commission, and Mr. Johannes Linn, Vice President, Europe and Central Asia Region, the World Bank. The delegation of FRY consisted of Mr. Miroljub Labus, FRY Deputy Prime Minister, Mr. Goran Pitic, Minister for Foreign Economic Relations of the Republic of Serbia, and Mr. Miroslav Ivanisevic, Minister of Finance of the Republic of Montenegro.

The primary focus of this meeting was to discuss urgent needs, and the ongoing and planned donor assistance to meet these needs -- in particular in Serbia where most of these needs currently arise. Close and coherent coordination is essential, as many donors are already active in FRY. This meeting was a first important step in this coordination process.

The meeting heard a presentation by the FRY authorities on the economic and political situation and challenges. The authorities thanked donors for the prompt assistance thus far and welcomed today’s meeting, which demonstrated the willingness of the international community to support their efforts. They pointed out the serious need in particular in several key areas of urgent need -- with the first priorities being energy, health and urgent social protection. They underlined their concern for arrears in these areas. The country is facing huge social and economic challenges to assist the most vulnerable, including refugees and the internally displaced to survive the winter. In this context they highlighted that the coming weeks and months will be crucial for consolidating democratic change and preparing a full recovery and transition program in close cooperation with the international community.

They emphasized the importance of looking beyond the urgent needs to a "spring scenario" of reform measures and to programs and projects aimed at economic recovery and transition. The authorities emphasized their determination to move away over time from donor aid. They also noted their intention to join the international financial institutions as quickly as possible. They emphasized resolute and early policy reforms oriented towards transition and market orientation, building rule of law-based governance, establishing closer integration with the European Union through its Stabilization and Association process.

The meeting reviewed an assessment of urgent needs expected to arise over the winter months prepared by the UN agencies under the direction of the UN Coordination and in collaboration with the authorities. The report points to the need for sufficient energy to cover heating needs for the winter, access to adequate food and medical supplies for the most vulnerable, as well as winterization to enable schools to properly function, and the needs of the social protection system. It was indicated that these urgent needs are likely to evolve as more information becomes available. The urgent needs total an estimated $1.4 billion, requiring external financing of $700 million, and a remaining need -- at the outset of the meeting -- of some $460 million.

Participants expressed their appreciation for the clear statement of priorities presented by the FRY authorities and reiterated a firm commitment to support the new democratic government. They recognized the measures already taken by the new authorities in a short period of time. They encouraged the FRY authorities to continue to work closely with the international financial institutions and the donors to pursue further measures needed to stabilize the economy and redress economic distortions. Given the large number of interested donors, they called on the authorities to take a proactive role in donor coordination. They stressed that assistance to FRY should not divert assistance to other countries in the region, and noted the importance of regional cooperation, including initiatives under the Stability Pact.

The meeting registered good progress towards meeting the urgent needs presented. Over the course of the last weeks -- and during the meeting itself -- some $509 million was announced by donors as ongoing or planned support towards urgent needs. However, it was noted that some $110 million of these funds were not directly related to the specific urgent priorities identified by the government and the UN. These funds have been made available for other key expenditures, such as support for local infrastructure and rule of law. The overall requirement now therefore stands at around $301 million, of which as much as $120 million is needed for gas imports. It was noted that this represents a substantial reduction from the needs identified before the meeting. This exercise has been extremely useful for the FRY authorities in highlighting for the donors the major priority areas of energy, health, and social protection. Several participants stated their intention to mobilize further assistance towards meeting these needs in the coming months. The European Commission and the World Bank will continue to work with the FRY authorities to match needs and donor contributions.

A second focus of the meeting was looking forward towards design of a medium-term Economic Recovery and Transition Program and coordinating donor assistance. The meeting heard a presentation by the IMF on the economic situation, and the establishment of an urgent macroeconomic stabilization program that was likely to be supported by an emergency post conflict program. It was also indicated that membership could be achieved before year end. Medium-term economic challenges were set out, including fiscal stabilization and adjustment, enterprise, bank and utility reform as well as reform of social protection systems.

The World Bank and the European Commission presented next steps ahead to develop over the course of the next several months an Economic Recovery and Transition program to address these medium term economic challenges. Sectoral teams have already been fielded and further missions will be fielded in January-February. A first report will set out the economic and structural reform agenda, and a second report will focus on detailed sectoral priorities, policy reforms and investment and capacity building needs. It was underlined that this would be a collaborative exercise conducted jointly with the FRY authorities and the international financial institutions and bilateral donors. In this context the EBRD noted that progress towards membership had been made, and the World Bank also confirmed good discussions were already underway on membership. It was noted that the Economic Recovery and Transition Report is expected to be ready by April 2000. This program is designed to serve as a basis for a Pledging Conference that could be organized for shortly thereafter.

Economic Reconstruction and Development in South East Europe

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