A slowdown in reforms and objections regarding the state of the rule of law have placed Serbia in a position where it could lose a significant portion of financial support from Brussels.
The amount in question is €1.6 billion – a combination of grants and favourable loans – which forms part of a broader European initiative aimed at accelerating the economic convergence of the Western Balkans with the European Union.
The programme, known as the Growth Plan for the Western Balkans and devised by the European Commission, was launched two and a half years ago with the idea of enabling the region to gain earlier access to certain segments of the EU’s single market, even before formal membership. Financially, the framework of this plan amounts to a total of €6 billion for the period from 2024 to 2027, distributed among candidate countries according to predefined criteria.
These criteria include population size as well as the level of development measured by gross domestic product per capita. However, Brussels has repeatedly emphasised that the final sums are not guaranteed in advance. On the contrary, the amount of funding depends directly on how quickly and effectively countries implement reforms and meet the required conditions.
This is precisely where delays arise in Serbia’s case. The European Commission is currently reassessing whether the country meets the necessary criteria to continue receiving funding, expressing concern over slow progress in certain areas.
At the same time, the question arises as to how the state would compensate for any potential shortfall in funding, and what projects the planned funds would be directed towards. According to available information, resources from the Growth Plan are intended to support infrastructure modernisation, improvements to the business environment, and the strengthening of institutional capacities.
Ivan Nikolić, President of the Council of Governors of the National Bank of Serbia, has also addressed these issues, noting that efforts are being made to meet Brussels’ requirements, while reminding that projected amounts are rarely realised in full.
According to him, it is realistic to expect Serbia to draw around €1 billion, which is still a significant sum, though not large enough in itself to resolve all the development challenges the country faces.
Marko Milanović, Special Adviser at the Fiscal Council, told Biznis.rs that it is difficult to predict in advance whether the funds will be disbursed to Serbia, but that it is important to understand the framework.
“Funds from the Growth Plan are not guaranteed in advance, but are conditional upon meeting clear criteria. Serbia has committed to implementing 98 reform steps in areas such as strengthening the rule of law, improving the business environment, energy transition, and developing human capital. However, the results so far are concerning, which has prompted the European Commission to consider this radical measure. Historically, the European Union has already used mechanisms to freeze funds from certain programmes in situations where systemic problems in the rule of law and corruption have been identified – the most recent case being Hungary,” Milanović points out.
He adds that, in this sense, the option of withdrawing funds from Serbia cannot be formally ruled out.
“However, such a scenario would represent an extreme measure, contingent upon serious and persistent deviation from the reform path. Even in the case of more significant breaches of obligations in the domain of fundamental values, a suspension of funds, as in the case of Poland between 2022 and 2024, appears more likely than the permanent withdrawal of allocated sums,” he says.
Under the Growth Plan for the period 2024-2027, Serbia has been allocated approximately €1.6 billion, with the possibility of extending the deadline. Roughly one third, or just over €450 million, consists of grants, while the remaining €1.1 billion relates to favourable loans.
“It is important to note that more than half of these funds (around 53.5 per cent) must be channelled through the Western Balkans Investment Framework (WBIF). In practice, this means financing specific projects proposed by Serbia: modernisation of railway infrastructure (Valjevo–Vrbnica, Brestovac–North Macedonia border, Stalać–Kraljevo, Kraljevo–Rudnica), development of the BIO4 campus, investment in student accommodation in Niš and Belgrade, reconstruction of damaged school buildings, development of broadband networks in rural areas, the innovation district in Kragujevac, as well as energy projects,” Milanović explains.
In other words, these are productive investments that directly affect long-term growth, rather than funds for current consumption, which is why their potential absence would represent a missed development opportunity.
“At the same time, access to these funds is strictly conditional on implementing the aforementioned reforms, which underscores their transformative function,” the Special Adviser at the Fiscal Council explains.
Responding to the question of alternative financing if the funds are not granted, Milanović says that Serbia could primarily rely on international capital markets and cooperation with commercial banks, following the model already used for some projects.
“Such a shift would almost certainly entail higher borrowing costs, but would not jeopardise macroeconomic and fiscal stability, given existing budget reserves. However, focusing solely on the fiscal aspect would be the wrong perspective. Although this is a significant amount of money, Serbia’s budget could relatively easily absorb its potential absence. The real cost of such a scenario is far greater,” Milanović believes.
He adds that funds from this mechanism are not merely a source of financing, but also an instrument for implementing reforms in areas where Serbia has long lagged behind the standards of developed countries.
“Their absence would therefore be reflected in the quality of life of citizens through slower improvements in public services, infrastructure, and the overall economic environment. Additionally, such a development would have a strong signalling effect. In an economy largely reliant on the EU market, a potential suspension of funds from the Growth Plan – amid several years of stagnation in European integration, including the fact that no new negotiation chapters have been opened for almost five years – would represent a further qualitative deepening of that stagnation and a sign of more serious reservations regarding Serbia’s progress towards membership,” he concludes.
Marko Milanović, Special Adviser at the Fiscal Council, believes that a potential drift away from EU integration would have harmful economic consequences far exceeding the value of the Growth Plan funds, as a large share of investment in Serbia is driven precisely by the country’s European perspective and access to the EU market; stepping outside that framework would negatively affect economic flows.
(Biznis.rs, 24.04.2026)