In spite of a setback during the current economic and financial crisis the Baltic
States have made a remarkable progress in their economic transition since
independence. Estonia and Latvia are according to the World Bank classification
high income countries and Lithuania is an upper middle income country. Having
recently implemented successful transition programs it can be argued that those
countries have a valuable and relevant experience to share with other lesser
advanced transition economies and developing countries. All the Baltic States
have recent experience in working with international financial institutions (IFIs)
and bilateral donors when advancing their own economic development. As EU
member states the Baltic States are committed to increase their contributions to
development cooperation. Multilaterally they already contribute to and participate
in the management of the World Bank Group (WBG) and the European Bank for
Reconstruction and Development (EBRD). In addition to this they are participants
in European Union (EU) development programs. All the Baltic States have also
initiated bilateral development programs. Currently most of their priority countries
are middle income countries in Europe and Central Asia. As the Baltic States
increase their aid volume according to their EU commitments is seems that they
will need to revise their development approaches, add new partner countries,
advance their coordination with other donors and become more active in their
participation in IFI where they currently are members. They also need to consider
broadening their participation by becoming members in IFIs such as the regional
development banks. It would seem ideal for the Baltic States to form partnerships
with the Nordic Countries since they already cooperate and share coordination
offices with them at the World Bank Group and the EBRD. Three of the Nordic
countries, Denmark, Norway, and Sweden, have large aid programs and are
active participants in the international dialogue on aid effectiveness that
emphasizes developing country ownership, donor harmonization, use of local
systems, development results and donor/partners mutual accountability. All the
Nordic countries are also participants in budget support operations including
Poverty Reduction Support Credits (PRSCs). However PRSCs are for low
income IDA countries and the most of the partner countries of the Baltic States
are not eligible for PRSCs. The paper will take stock of the current situation of
the development programs in the Baltic States, including main partner countries
and priority sectors and suggest new venues to expand their engagement as
their aid programs become larger. This will include discussion about the current
project approach and possibilities to engage in budget support. This could be
done via Development Policy Lending (DPL) in partnership with the World Bank
and other donors when the Baltic States assist their current middle income
priority countries and in PRSCs if they decide to add low income countries to
their list of priority countries. This article is based on a review of theoretical
literature, interviews, secondary data and the author’s experience as a staff
member of the World Bank Group for 12 years in three continents.