$300 Million World Bank Loan to Aid Serbia Flood Recovery

The World Bank has approved a $300 million loan (227.5 million Euros) for the Floods Emergency Recovery Project for Serbia. The loan will run over a 30-year period and is aimed at helping Serbia recover from floods in May that killed 57 people and devastated its energy sector, the lender said in a statement on Saturday 04 October 2014. The loan will support Serbia in meeting critical needs in the power and agriculture sectors, repairing damaged flood control infrastructure, and helping the country better respond to natural disasters.

The heaviest rainfall in living memory caused rivers to burst their banks and sweep away roads, bridges and homes, causing damage estimated at €1.5 billion ($1.88 billion). The cost means the Serbian economy is expected to contract in 2014, further complicating government efforts to rein in a budget deficit seen at more than 8% of national output. The floods directly affected some 1.6 million people, or about one-fifth the total population of Serbia, living in 49 municipalities and cities.

Energy

The disaster had a broader impact on the country as a whole due to the damage to the country’s electricity generation and supply system. Many will remember the images of the flood waters creeping dangerously close to Serbia’s power plants.

Sandbags and flood defences for the Tesla Power Plant. Photo ECHO
Sandbags and flood defences for the Tesla Power Plant. Photo ECHO

The loan will have a strong emphasis on energy and will support electricity imports (EURO 120 million) to improve availability and avert an impending energy crisis.

“We cannot leave Serbian families in the cold this winter, so ensuring a reliable power supply is the top priority for Government and for us,” says Ellen Goldstein, World Bank Country Director for Southeast Europe. “Reliable power and an adequate agricultural harvest are also critical elements in maintaining economic activity and restoring growth to the Serbian economy in the aftermath of the floods.

According to the World Bank statement:

The operation will help close the financing gap for the energy purchases to ensure power during the upcoming winter, and will also strengthen critical energy infrastructure. In particular, the operation will dewater Serbia’s largest mine, the Tamnava West Open Pit Mine – which remains inundated and unable to provide two-thirds of the fuel supply for the country’s Kolubara power plant – while financing substitute electricity sources.  In the agriculture sector, the project will help ensure direct support to farmers in affected areas, providing these farmers with the income security needed to invest in their farms. The project will also help improve resilience to disasters by financing repairs to critical flood prevention infrastructure

Agriculture

In the agricultural sector, the Floods Emergency Recovery Project will replenish the government’s ongoing Farm Incentives Program in order to protect the livelihood of farmers affected by the floods and offset their income losses, with EURO 53 million to cover the costs of this program for payments to farmers in the 49 municipalities affected by the floods.

Flood Protection

Remaining funds from the loan will finance urgent rehabilitation of the flood protection and drainage control infrastructure, and strengthen the technical capacity of the government agencies for improved flood prevention and management