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Economic convergence is crucial for integrating the Western Balkans with the EU. On November 8, 2023, the European Commission launched the Reform and Growth Facility for the Western Balkans (RGF), a new financing instrument for 2024-2027 that links fundamental reforms and increased financial assistance into a new growth plan for the region.
The RGF, totaling €6 billion, will combine grants and concessional loans. In alignment with the European Green Deal and the Green Agenda for the Western Balkans, at least 37% of the non-repayable financial support through the WBIF will be dedicated to climate objectives. The RGF, along with other pillars of the new growth plan offering a comprehensive package of measures, has the potential to double the size of the Western Balkan economies within the next decade.
The RGF will complement the existing financial assistance under IPA III, and together these will be the primary financing instruments for the Western Balkans from 2024-2027. The combined financing from these two instruments will offer the region a financing intensity per inhabitant similar to that of the EU’s cohesion policy. This initiative is expected to boost socio-economic convergence, bring Western Balkan partners closer to the EU’s single market, and demonstrate the tangible benefits of closer EU integration even before accession.
The RGF introduces extensive ex-ante conditionality through a payment mechanism based on achieving key reforms outlined in the reform agenda, replacing the structural reform component of the economic reform programmes. To receive support under the facility, each WB partner in the region must prepare a Reform Agenda, detailing the reforms they plan to undertake to achieve the facility’s objectives. This reform agenda, prepared by the beneficiaries in consultation with and assessed and adopted by the Commission, will identify priority reforms with specific qualitative and quantitative steps serving as payment conditions. Beneficiaries will also need to meet preconditions related to the fundamentals of the enlargement process, such as the rule of law, democracy, and respect for human rights and fundamental freedoms.
EU member states will play a key role in approving the beneficiaries’ Reform Agendas and any necessary amendments. Macro-financial stability, sound public financial management, and budget transparency and oversight are general conditions for any fund release, which will occur twice a year, similar to general budget support operations. If conditions are not met, the Commission will suspend or reduce the corresponding payment amount.