I have a really old bike that hasn't been ridden in dozens of years. Now tho, I want to update it to road bike. It is in really bad condition and because I'm from Eastern Europe, my budget is low. What parts do I need to change/add/remove? Size of frame is 56cm/22".
The only easily replaced part are the tires. The rims look too wide to fit actual road racing tires, but you can probably find something with lower rolling resistance.
Other than that, this is not a road bike in the usual English sense of the word and can be turned into one only by replacing everything. Consider getting a suitable used bike instead.
Check the perishable parts and replace with new if required. That's tyres, tubes, brake blocks.
You should find and fit some rear brakes as well - I see mounts but no arms, and the brake outer appears to be cut just in front of the seat tube.
Otherwise grease and repack the wheel bearings if they need it, and clean and oil the chain.
For comfort and keeping clean, I'd suggest keeping the mudguards/fenders too.