World Bank and Romania Sign EUR 600 Million Loan to Support Inclusive and Green Growth

BUCHAREST  – The World Bank and Romania, through the Ministry of Finance, signed today a EUR 600 million Inclusive and Green Growth Development Policy Loan (DPL). Approved on June 30 by the World Bank’s Board of Directors, this loan is the first in a programmatic series of two financing operations, and is complemented by a USD 24.2 million grant provided by the Innovative Global Public Goods Solutions Fund of the World Bank, also signed today. The loan and the grant support the Government in pursuing key structural reforms to strengthen social inclusion (including response measures to the humanitarian crisis) and fiscal management, foster decarbonization and climate resilience.

“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,” said Anna Akhalkatsi, Country Manager for Romania, World Bank.

Romania has made impressive strides in poverty reduction and raising its economic performance over the past two decades. However, regional income and service delivery disparities remain wide and there is room for growth to be boosted by further improving institutions – including by enhancing tax collection rates and spending inefficiencies-, broadening the coverage and adequacy of social assistance, and advancing climate change adaptation and mitigation action. The World Bank’s EU Regular Economic Report released yesterday highlights that the pandemic and war in Ukraine have further deteriorated the growth environment and have slowed Romania’s convergence with the European Union.

The Government of Romania is committed to addressing these challenges and to undertaking reforms that are central to strengthening potential growth and helping to offset recent adverse effects on the economy.

“The loan and the grant signed today confirms 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,” said Adrian Câciu, Minister of Finance.

The DPL is accompanied by the provision of technical assistance to assist the Romanian Government in strengthening public sector institutions and supporting an integrated approach to reform implementation. Specifically, the financing and technical assistance package targets key development areas such as social assistance, pension and public wage reforms, and tax policy and tax administration, which are critical for strengthening the fiscal management and addressing medium-term fiscal sustainability. It also underpins private investment and EU funding mobilization, primarily in renewable energy, energy efficiency and forestry, while supporting infrastructure development and the business environment.

The World Bank support is provided under the World Bank’s Country Partnership Framework for FY2019-23 (reviewed in 2021). This year marks 30 years of partnership between the World Bank Group and Romania. The World Bank’s active portfolio in Romania is composed of 10 investment projects totaling US$1.78 billion, and 31 Advisory Services and Analytics tasks amounting to US$104 million. As of July 1, IFC’s committed portfolio was $1.272 billion with over 30 clients, of which 55 percent represented investments in financial institutions, and the remaining 45 percent in the real sector. IFC’s committed own account portfolio in Romania ranks 1st in the newly created IFC Europe region.