May 9, 2001The Executive Board of the World Bank yesterday determined that the Federal Republic of Yugoslavia (FRY) has fulfilled the necessary conditions to succeed to the membership of the former Socialist Federal Republic of Yugoslavia (SFRY) in the World Bank. (The other four successors to the SFRYBosnia-Herzegovina, Croatia, Slovenia and the former Yugoslav Republic of Macedoniahave also become members of the World Bank.)

"The Government of the Federal Republic of Yugoslavia has fully satisfied the requirements for Bank membership," said World Bank Director Christiaan Poortman. "We look forward to working together on reviving the country's economy and improving living conditions for all the people of Yugoslavia."

The Federal Republic of Yugoslavia has embarked on a reform program centered on transition to a market economy. FRY was formed in 1992 out of the Republics of Serbia and Montenegro as the former Socialist Federal Republic of Yugoslavia (SFRY) was breaking up in civil conflict. Nearly ten years of strife, international isolation, and poor economic management, have left a daunting legacy. GDP is 40 percent of its level at the start of the decade and the number of poor has doubled.

With decapitalized, state- and socially-owned enterprises, insolvent and deeply mistrusted banks, and over-committed, poorly functioning social safety nets, FRY must now catch up with reforms begun a decade ago by many of its neighbors in Central and Eastern Europe. The process will be made more difficult by large and mounting fiscal pressures, a crippling external debt, weakened governance, and post-conflict challenges that include rebuilding damaged infrastructure and meeting the needs of a large population of refugees and displaced. Decisive reforms and concessional assistance from donors will be needed for FRY to move toward sustainable recovery and international re-integration.

As part of the membership package, Executive Directors also approved a plan for clearing FRY's IBRD arrears, and temporary exceptional IDA eligibility. (The International Bank for Reconstruction and Development [IBRD] and the International Development Association [IDA] are the two branches of the World Bank Group commonly referred to as "The World Bank."  The Executive Board meeting approved FRY's membership application for the IBRD.) 

Though membership has been established, it is likely to take several additional months to actually resolve arrears, which currently total about US$1.7 billion. New Bank financing is thus likely to become available in the first part of FY02 (which begins July 1, 2001). Up to US$540 million in IDA lending could now be made available over a three year period.

With membership in place, the Bank will be able to support FRY's economic development through a Transitional Support Strategy that sets out a program for FY02. The World Bank is also working to prepare a comprehensive Emergency Recovery and Transition Program for FRY. This is currently being finalized with the government for presentation to donors at a pledging conference tentatively planned for June 2001.

For near-term assistance, the Bank set up a US$30 million trust fund for FRY in March, 2001. Selected priority activities financed through this trust fund will allow the Bank to support FRY in its efforts to improve economic conditions in the near term, and assist the government in shaping its longer-term policy agenda.

The conditions for succession to Bank membership were that FRY would: (a) become a member of the International Monetary Fund; (b) accept the Bank's Articles of Agreement and the terms and conditions of subscription to the shares of Bank capital to which it succeeds; (c) make local currency payments as necessary with respect to shares to which it succeeds; (d) enter into final agreement with the Bank on the loans of SFRY it assumes; and (e) agree with the Bank on a plan to eliminate the arrears to the Bank.

With the succession of the FRY, which will be retroactive to February 25, 1993, IBRD membership now totals 183 countries.

Useful Links: For more information on World Bank members, click here. For more information on FRY's membership to the IMF, click here. To see the new World Bank Federal Republic of Yugoslavia web page, click here.