Background
Development finance is essential for enabling low- and middle-income countries to strengthen their sustainable development programs, as it provides the critical financing needed to close domestic financing gaps, notably in the energy sector. Coal remains a vital energy source for the energy sectors of the Western Balkans (i.e. Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia). The energy sector is a critical part of the five countries’ quest to decarbonize (i.e. follow the path to net zero emissions) due to its central role as the largest contributor to gas emissions at greenhouse effect and essential catalyst for the transition to sustainability. This article presents a development finance mapping exercise for the energy sectors of five Western Balkan countries. The study conducted a literature review and detailed analysis of development finance flows related to the energy sector of the five countries from 2008 to 2020. The objective was to provide an overview of development finance flows for sources of energy. renewable and non-renewable energy in five Western Balkan countries. .
Results
The literature review revealed a significant lack of knowledge on the effects and effectiveness of development finance in the Western Balkans. Data analysis identified US$3.2 billion in energy development financing in the countries examined. Disbursement rates were above the global average of 63%. Serbia received the largest proportion of total funding, while Montenegro received the highest funding per capita. Data analysis did not establish a link between the adoption of the Paris Agreement in 2016 and increased development finance flows for renewable energy projects. About a third of the development funds disbursed were invested in energy supply projects using non-renewable sources. Official development assistance loans accounted for 37% ($1.2 billion) of total financing, contributing to the five countries’ rising debt. Bilateral and multilateral development donors based in Europe were the most important actors in all five countries examined.
Conclusions
The amount of development finance disbursed was insufficient to cover a significant percentage of the needs of the countries studied. Although carbon-intensive energy infrastructure received considerable funding, the total amount of energy development finance disbursed ranged between 0.15 and 0.62 percent of the average gross domestic product of the countries analyzed during the period. of study. Based on the research findings, we recommend that development donors and recipient countries pay greater attention to planning the disbursement of strategic financing.
