Two World Bank Loans: 200 Million Euros for Post-Earthquake Reconstruction and 275.6 Million Euros for Crisis Recovery

The government decided at its meeting on Thursday to initiate procedures for signing contracts for two loans with the World Bank – one worth 200 million euros for the post-earthquake reconstruction project and strengthening the response to Covid-19, and the other amounting to 275.9 million euros, intended for a broader response to the crisis and support for recovery. 

Regarding the decision to initiate the procedure for signing a loan agreement between the Republic of Croatia and the International Bank for Reconstruction and Development (IBRD), which is part of the World Bank group, for the post-earthquake recovery project and strengthening the response to Covid-19, it should secure 200 million euros for the reconstruction of buildings damaged by the earthquake that struck Zagreb and its surroundings on March 22.

Deputy Prime Minister and Minister of Construction and Spatial Planning Predrag Štromar stated that his ministry immediately after the earthquake began drafting a reconstruction law, and simultaneously initiated the process of securing funds for this purpose.

In addition to intensive preparations for applying for funds from the European Solidarity Fund, Štromar reported that a series of discussions were held with the World Bank, and since April, this communication, along with the preparation of documentation, has been daily, and the process has progressed significantly faster than usual.

Štromar reminded that, in cooperation with the Zagreb Faculty of Civil Engineering and the Croatian Chamber of Civil Engineers, the first estimates of reconstruction costs have been made, and as the most optimal model, experts proposed one under which the reconstruction would cost around 42 billion kuna. He also reminded that the government, through a budget revision, secured funds for urgent repairs, as well as temporary accommodation for those who cannot return to their homes.

Plenković: Reconstruction to the Maximum Seismic Level Would Cost 13 Billion Euros

Prime Minister Andrej Plenković also stated that, according to estimates from representatives of the Zagreb Faculty of Civil Engineering, the reconstruction of all buildings damaged by the earthquake to the level that is technically prescribed as the maximum and necessary seismic level would cost a total of 13 billion euros.

– For our public, especially for citizens in Zagreb, we must understand that the reconstruction of Zagreb to those standards would cost us as if we were going to build 25 Pelješac bridges (…) Just to keep in mind how big a job this is, how much it costs, and how long it will take. And we will, in this way, through discussion, come to those solutions and amounts that will be appropriate – said Plenković.

Loan to Overcome the Impact of the Covid-19 Pandemic on the Croatian Economy

The government also made a decision to initiate the procedure for signing a loan agreement with the World Bank, worth 275.9 million euros, as a response to the crisis and support for recovery.   

– Faced with the extremely adverse impact of the Covid-19 pandemic on the Croatian economy and the sustainability of public finances, and considering the significant damage caused by the earthquake, the Ministry of Finance approached the World Bank in early April with a request to consider the possibility of providing support aimed at overcoming these challenges – reported Deputy Prime Minister and Minister of Finance Zdravko Marić.

A loan proposal has been prepared that allows for quick access to liquidity for the needs of the state budget, and relates to support for a program defined through a matrix of nine measures, which pertain to two key areas – mitigating the immediate social and economic impact of the crisis and laying the foundations for promoting inclusive and sustainable recovery, he said. 

The first area thus includes, among other things, funds for measures from the Croatian Employment Service, which includes ensuring wage support for a duration of three months – to employers who continue to retain workers with indefinite and fixed-term contracts, as well as to users of self-employment support – and there is also support for “permanent” seasonal workers.

The second pillar relates, among other things, to the introduction of a new national allowance for the poor, vulnerable segment of the population (over 65 years old), as well as amendments to national rules for the use of EU funds, aimed at improving administration and management and supporting investments during the economic recovery period.

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