Poortman hopes this support will enable FRY to be a force of economic progress and a dynamic element in the Southeast Europe Region. He is optimistic that FRY can become a self-sustained country that is increasingly reliant on private sector flows rather than international aid in the coming years, and one that has the potential of bringing the region together with a strong revived economy.

The pledges, which are for commitment in 2001, fully meet the target of US$1.25 billion identified in the Economic Recovery and Transition Program (ERTP) prepared by the World Bank and the European Commission with the FRY authorities. The program calls for a total of some US$4 billion over the next three to four years. The ERTP, which covers the Federation as well as Serbia and Montenegro, outlines a comprehensive structural reform agenda, including sectoral policy reforms and priority public investments, as well as identifying urgent balance of payments/budget needs for 2001.

"This is a tremendous response by the international community" said Johannes Linn, Vice President for the Europe and Central Asia Region. "Over the last six months, the new FRY government has proven itself as a serious force for reform, ready and able to move forward on the economic recovery program which now has the full support of the donor community. It is important that this support includes a substantial component of quick-disbursing finance on sufficiently concessional terms. And it must be quickly converted into real disbursements on the ground."

As it gains more self-sufficiency, Poortman envisions FRY on its way to being fully integrated into the European community. "In 3 to 4 years, FRY could be well on its way to EU membership which would further cement FRY in the international community."

FRY fulfilled the conditions to succeed to the membership of the former Socialist Federal Republic of Yugoslavia (SFRY) in the International Bank for Reconstruction and Development (IBRD) on May 8, 2001, and in the International Development Association (IDA) on June 11.

As part of the membership package, the Board agreed to grant FRY temporary exceptional eligibility for funding from the IDA, the World Bank's concessional finance facility.

The Board also approved a Transitional Support Strategy that sets out a program of support for FY02. The package approved by the Board provides for up to US$540 million in IDA lending over a three year period. It also agreed on a plan for clearing FRY's IBRD arrears which currently total about US$1.7 billion. Once arrears are actually resolved, FRY will have access to regular Bank financing. In the interim, the Bank's Board of Directors agreed to establish a special Trust Fund for FRY (TFFRY) in the amount of US$30 million, funded from IBRD surplus, to enable the Bank to support in the near term a number of projects critical to launching the recovery and transition effort.

Initial projects funded from the TFFRY include assistance to the social safety net, technical assistance for enterprise privatization, financial sector technical assistance, emergency electricity restoration and coastal sewerage improvements.

"The World Bank has comparative advantage being involved in FRY namely in donor coordination, its extensive global experience on transition economies and its expertise on macroeconomic, balance of payments/budgetary issues and social programs," says Poortman.