WASHINGTON, April 27, 1999-A high-level meeting of governments and international agencies was held in Washington today on the international community's response to the Kosovo crisis and its impact on neighboring countries in the Balkan region. The meeting, convened under the auspices of the World Bank and the International Monetary Fund (IMF), was co-chaired by World Bank President James Wolfensohn and IMF Managing Director Michel Camdessus. Representatives of seven international agencies and 33 countries participated, including representatives of the six Balkan countries most immediately affected by the crisis: Albania, the Former Yugoslav Republic of Macedonia, Bosnia and Herzegovina, Bulgaria, Croatia, and Romania.

The objectives of the meeting were threefold:

• To review the short-term response of the international community to the humanitarian, economic and financial needs of the six most-affected countries, set out in an impact assessment report prepared jointly by the IMF and the World Bank;¹

• To exchange views on a medium- to long-term approach for economic reconstruction and recovery, growth and progress in reaching social stability in the region once peace is achieved; and

• To formulate next steps for coordination of the international community's response to the economic and social impacts of the crisis.

Short-Term Response

The meeting was informed by the representative of the United Nations High Commissioner for Refugees of ongoing efforts to provide humanitarian assistance for the more than 600,000 Kosovar refugees in neighboring countries. Concern was also expressed about the hundreds of thousands internally displaced within the Federal Republic of Yugoslavia, including Montenegro and in Kosovo itself. Special recognition was given to the refugee receiving countries. Many speakers stressed the need for close coordination of relief efforts and initiatives to alleviate the macroeconomic impacts of the crisis. Speakers broadly endorsed the methodology adopted by the joint IMF/World Bank paper to assess the economic, financial and social costs of the crisis; however, many noted that the projections for financing needs for 1999 were likely to be underestimated and thus would need to be amended to include indirect impacts such as the effect of the crisis on domestic business activity, unemployment, social conditions and overall poverty levels. The projections would be revised on an ongoing basis.

No pledges were made or sought at today's meeting. The meeting took note of the multilateral and bilateral donor support already provided to the affected countries. It welcomed the recent decision taken by the Paris Club to defer all debt service payments falling due to them by Albania and Macedonia during the year ahead. Participants reflected a broad consensus regarding the guiding principles for donor assistance set out in the joint paper. Five critical dimensions were stressed:

• Urgency. A swift donor response is required to help meet the severe humanitarian and other financial needs generated by the crisis.

• Reform and Governance. Affected countries should do their part by maintaining the momentum of adjustment and structural reform and by ensuring good governance under these difficult conditions.

• Additionality. External and budgetary gaps for 1999 need to be filled with quick-disbursing assistance in amounts over and above donors' planned aid programs for affected countries. This will involve an important role for bilateral donors and the international financial institutions.

• Concessionality. Financing on sufficiently concessional terms is critical, especially for the poorer countries of the region, if the crisis is not to result in further indebtedness and additional medium-term fiscal pressures.

• Coordination. While the crisis is by nature regional, actual aid flows should continue to be mainly channeled on a country by country basis; thus, strong donor coordination will be essential to ensuring the regional dimensions of the crisis are adequately addressed.

Medium-Term Approach

Many speakers addressed the need for a medium-term approach to the Balkan region, focusing on durable peace and economic stability once the current conflict is over. A number of participants noted the importance of planning for refugee return and reconstruction in Kosovo once the conflict is over. Several suggestions for regional coordination were discussed. The meeting broadly endorsed the need for a comprehensive regional framework that would take account of the political and humanitarian as well as economic and social factors-including plans for post-conflict reconstruction and recovery-needed to ensure stability in the region in the medium-term. In this regard, the meeting called upon the international financial institutions to continue to develop, refine and update on an ongoing basis their assessments of the economic, financial and social costs of the conflict, and formulate strategies for dealing with the medium- to long-term economic challenges facing the countries in the region. The World Bank and the European Union were called upon to coordinate needs assessment and modalities for assistance.

Next Steps

• Country-specific donor meetings are being held in the coming weeks to seek pledges to close the funding gaps for individual countries, co-chaired by the World Bank and the European Union.

• There was a widely-shared view that the international assistance effort would benefit from high-level political guidance.

• It was announced that a Balkan Meeting will be held at the end of May in Bonn to further define concrete steps towards, inter alia, developing a framework for the medium-term development of the region.

¹"The Economic Consequences of the Kosovo Crisis: A Preliminary Assessment of External Financing Needs and the Role of the Fund and the World Bank in the International Response," April 1999.