World Bank and Romania Agree on EUR 600 Million Loan to Support Inclusive and Environmentally Friendly Growth

Published on: 19 July 2022
by KnowESG
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The World Bank and the Romanian Ministry of Finance inked a 600 million euro Inclusive and Green Growth Development Policy Loan (DPL).

This loan, which was approved on June 30 by the World Bank's Board of Directors, is the first in a programmatic series of two financing operations and is accompanied by a USD 24.2 million grant from the World Bank's Innovative Global Public Goods Solutions Fund.

It will help with structural changes to enhance social inclusion (including response measures to the humanitarian crisis) and fiscal management, as well as promote decarbonisation and climate resilience.

Anna Akhalkatsi, Country Manager for Romania, World Bank, said: 

"Romania’s recent upgrade to the group of high-income countries is encouraging, but the population is still among the poorest and most unequal in the European Union and much remains to be done. This partnership will support the government’s efforts to address inclusion, as well as constraints to Romania’s sustainable and green growth."

In the past two decades, Romania has achieved tremendous gains in reducing poverty and improving its economic performance. However, regional income and service delivery disparities remain substantial, and there is room for growth to be bolstered by further improving institutions—such as by increasing tax collection rates and reducing spending inefficiencies—expanding the coverage and adequacy of social assistance and advancing climate change adaptation and mitigation action.

The EU Regular Economic Report, published by the World Bank yesterday, notes that the pandemic and war in Ukraine have further weakened the growth environment and hindered Romania's convergence with the European Union.

The Romanian government is dedicated to resolving these difficulties and implementing changes essential to bolstering growth potential and mitigating recent negative effects on the economy.

Adrian Câciu, Minister of Finance, said:

"The loan and the grant signed today confirm the World Bank’s recognition of the stability of our country’s macroeconomic framework and also of the progress made in responding to the current humanitarian crisis and structural reforms in areas related to efficient public spending, fiscal, renewable energy, and increasing the energy efficiency of buildings. On the other hand, this operation reconfirms the active role of the World Bank in responding promptly, through financing and technical assistance, to the specific needs and efforts of the Romanian authorities to increase the growth potential of our country."

The DPL is supplemented by the provision of technical assistance to aid the Romanian government in improving public sector institutions and promoting an integrated approach to implementing reforms. 

Specifically, the finance and technical assistance packages target key development areas such as social assistance, pension and public salary changes, and tax policy and tax administration, which are essential for enhancing fiscal management and addressing fiscal sustainability over the medium term. 

It also supports private investment and the mobilisation of EU financing, notably in renewable energy, energy efficiency, and forestry, as well as infrastructure development and the business environment.

The World Bank's assistance is provided under its Country Partnership Framework for FY2019–23 (reviewed in 2021). This year celebrates the 30th anniversary of the World Bank Group's cooperation with Romania. 

The active portfolio of the World Bank in Romania consists of ten investment projects totalling $1.78 billion and thirty-one advisory services and analytics assignments worth US$104 million. 

On July 1, IFC's committed portfolio totalled $1.272 billion with over 30 customers, of which 55% represented investments in financial institutions and 45% in the real sector. In the newly established IFC Europe area, IFC's committed own account portfolio in Romania ranks first.

Source: The World Bank

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