The World Bank said Friday, February 11, it had approved a financial guarantee to Serbia of up to 300 million euros ($400 million) to help the country to support its budget and refinance its debts.

"This operation helps Serbia access international markets at lower costs and longer maturity, and it also supports improving the business environment, strengthening financial discipline... and building a stable and more efficient financial sector," the World Bank said in a statement.

The Policy Based Guarantee (PBG) is issued by the International Bank for Reconstruction and Development (IBRD), a member of the World Bank Group, and it will cover the principal amount of a commercial bank borrowing of up to EUR 300 million, with a 6-year bullet maturity on a non-accelerable basis.

"Thanks to this policy based guarantee, eight global banks have had an opportunity to do a due diligence on Serbia, and the Serbian Debt Management Authority has had a chance to get familiar with the legal requirements of international tenders and global banks," says Jane Armitage, the World Bank Country Director and Regional Coordinator for South-East Europe.

The guarantee and underlying loan has been designed in a way that will enable the Government of Serbia to re-finance obligations coming due at reduced cost. This should further strengthen Serbia’s debt profile, the statement reads.

The PBG encourages continuation of the reforms supported under the two previous private and financial sector development policy loans. The objectives of the PBG are to improve the business environment, strengthen financial discipline in the non-private enterprise sector, and build a stable and more efficient financial sector.