Private and Financial Sector Policy Based Guarantee

The proposed IBRD Policy-based Guarantee (PBG) equivalent to US$400 million in Euros will be used to either enhance a Eurobond issuance or international loan syndication. If the Guarantee is used to enhance a Eurobond issue, Serbia would gain access to the international capital markets for the first time, despite challenging regional conditions and global financial market uncertainty. If the Guarantee is used for an international syndication, the transaction would lead to improvements in pricing and tenor and strengthen Serbia's presence in liquid markets. The Guarantee is designed to support the Government in completing a set of financial and private sector reforms initiated under PFDPLs 1&2 as well as earlier Bank-supported structural adjustment operations. The proposed Guarantee will also be complemented by a DPL operation aimed at supporting Serbia's Public Expenditure Management. Further, the reforms supported under the Guarantee are aimed at increasing the GoS capacity in commencing the process of economic recovery and absorbing any follow-up shocks caused by global economic crisis. The proposed structure includes guarantee coverage of sovereign risk of nonpayment of principal in year 5 of bullet Eurobond or Syndicated Loan. Prevailing IBRD guarantee fees would apply. Final structure will be established through negotiation with international banks.