Donor support, both in the form of grants (free money) and loans, plays an important role in financing investment, supporting reforms and meeting balance of payments financing needs. At the beginning of 2005 the European Commission / World Bank Joint Office for South East Europe launched a regional data collection exercise designed to capture the total envelope of assistance being provided by donors to all countries of the region between 2003 and 2005. Data for 2001 and 2002 were available from a previous exercise. The exercise covered the “beneficiary countries” of the Stability Pact, meaning the countries of the Stabilization and Association Process (Albania, Bosnia and Herzegovina, Croatia, FYR Macedonia, Serbia and Montenegro (including Kosovo), the two SEE accession countries, Bulgaria and Romania, as well as Moldova). 17 donors reported to the Joint Office on their commitments in 2005, of which 13 bilateral donors, the European Commission and four financial institutions (EIB, EBRD, World Bank, Council of Europe Development Bank). The donors were asked to report on new commitments for technical assistance, investment finance, adjustment loans and undesignated budget support, excluding humanitarian assistance and IMF loans.

The results have shown that overall levels of assistance to South East Europe will remain in the order of €6-7 billion until 2005 with a peak year so far in 2002. The source of assistance, however, is shifting from grant financing by bilateral donors to loans, either at market rates or concessional, from financial institutions. 

The shift largely reflects a sharp reduction of grant assistance to those SAP countries that benefited from exceptional efforts of the donor community in post-conflict reconstruction and recovery. However, the decline of assistance particularly affects the group of poorer countries pursuing Poverty Reduction Strategies including Albania, Bosnia and Herzegovina, Serbia and Montenegro. These countries may in future be hard pressed to sustain the speed of the transition process on which they embarked only a few years ago.

These high levels of external assistance to the Balkans have been exceptional, however, and it is expected that donor assistance will begin to decrease as the countries recover, and their economies become increasingly self-sustaining through economic and fiscal policy reforms, investment, and private sector growth. A repeatedly acknowledged key step towards achieving prosperity in these countries is closer integration of South East Europe within EU and global structures.