The loan is worth 22 million euros.
The World Bank Executive Board approved a 22 million euro loan and a 350 million euro guarantee to Croatia on Friday. The money will go towards the modernisation and the restructuring of the road sector, reports tportal.hr on April 29, 2017.
The project of restructuring and the modernisation of the road sector aims to provide a comprehensive solution to address institutional, business and financial issues by supporting reforms in the management, restructuring, planning and follow-up of operations, by which the state-owned enterprises in the transport sector will become more efficient, the World Bank said in a statement published on Saturday.
The support will be geared towards institutional investment management, as well as towards corporate governance and management, all in order to ensure that future investments are economically justified.
The project will also deal with business practices in order to increase business efficiency, while achieving as much revenue as possible and reducing business expenses. The aforementioned measures are also supported through the existing EBRD loan, which supports the refinancing of the restructuring of the motorway part of the sector.
“We are very pleased to support Croatia in both business and the financial restructuring of the public road sector, which will help Croatia to proceed with financially viable development and reduce the need for state aid in the sector. Strengthening of the capacity of road companies to repay their debts will also directly reduce the government debt, while the planning and management improvements will help rationalise investments.” Arup Banerji, the World Bank's regional director for European Union countries stated.
The World Bank statement also adds that the Croatian road network is the largest infrastructure project in the country, covering more than 75 percent of the demand in the transport sector.
In recent years, Croatia has significantly expanded its road network with large investments in motorways, in order to integrate most of the regions, stimulate growth of the economy and of tourism, and include Croatian roads in the wider European network. After 20 years of enormous investments in infrastructure, Croatian state-owned companies, Croatian Roads, Croatian Motorways, and Rijeka-Zagreb Motorway, are now burdened with 5.2 billion euros of debt, fully covered by state guarantees. In addition, the sector needs better management, efficiency and transparency solutions, the World Bank says.
Croatia currently provides substantial support to the road sector, whose debt now reaches 11 percent of the GDP, which state-owned road sector companies are not able to repay and refinance without government guarantees.
The funding of the project will be implemented through a loan of 22 million euros and a guarantee of up to 350 million euros, which will enable the government to raise funds to refinance the debt by loans or bonds.
The loan will strengthen the management and the business capacities of road companies while the guarantee will improve their creditworthiness, which will enable companies to optimise the structure of their existing debt through access to commercial borrowing under more appropriate conditions for their business needs, the statement adds.
