North Macedonia - Public Sector Energy Efficiency Project : Additional Financing

Overview & Synopsis

The development objectives of the Public Sector Energy Efficiency Project for North Macedonia are to: (i) reduce energy consumption in the public sector; and (ii) support the development and implementation of a sustainable financing mechanism for energy efficiency in the public sector. Due to COVID-19 crisis and impact of Russia's invasion of Ukraine, the costs of construction, including material and labor costs, in global markets have significantly increased. North Macedonia was no exception; in the period from 2019 to mid-2023, the national construction cost index increased by over 50 percent. The same events have contributed to an energy crisis in North Macedonia. Public institutions have been struggling to pay unprecedented energy bills due to soaring prices of natural gas, fuel oil, electricity, and other heating fuels. Due to the sharp rise in construction costs, the financing under Component 1b was insufficient for renovation of all the health buildings for which tender documents were prepared. Therefore, the Ministry of Finance (MoF) sought grant funding from the Western Balkans Investment Framework (WBIF) with the Bank’s support. The application was approved on June 30, 2023, and the WBIF grant in the amount of EUR 2.14 million would be included in the Project through this Additional Financing. The AF requires the following changes in the project: Costs of components of the Project and addition of WBIF grant; Reallocation of IBRD loan proceeds; Closing date will be extended by 16 months, from September 30, 2025, to January 31, 2027, to allow completion of additional EE investments in central government buildings; Revision of results framework; Revision of disbursements estimates; and Revision of references to the EEF in the loan agreement.