The World Bank Board of Directors approved a US$200 million loan yesterday to consolidate Colombia’s economic recovery and fiscal sustainability. This loan is the second of two Development Policy Loans (DPLs) designed to support the budget program of President Juan Manuel Santos’ administration.
Colombia’s fiscal program strengthens the government’s capacity to undertake countercyclical policies, including the implementation of social programs to protect the most vulnerable in an economic slowdown.
“This operation represents a new step in the relationship between Colombia and the World Bank, which goes back many years and is now focused on moving forward in terms of fiscal consolidation and State modernization in areas of crucial importance for development,” stated Mauricio Cardenas, Minister of Finance and Public Credit.
This financing seeks, among other objectives, to improve the predictability and stability of the national budget, supporting the implementation of key reforms such as the tax reform of 2010. It also seeks to strengthen social sector management, particularly in the area of health, as well as reducing fiscal vulnerability to natural disasters.
"We welcome Colombia’s continuous efforts to consolidate an improved fiscal management. Sound finances, along with good tax and pension systems, are key to the development of any country,” maintained Gloria M. Grandolini, World Bank Director for Mexico and Colombia.
Some of the results expected from the fiscal reform that the government is going to undertake and which is backed by this operation include:
Reduction of the central government’s structural fiscal deficit from 3.2 to 2.7 percent of Gross Domestic Product (GDP) between 2011 and 2013;
Positive assessment of Fiscal Rule implementation on the part of the Committee in charge;
Financial improvements to the Health System with the objective of reducing health care costs that are not covered by insurance policies within the contributory scheme to no more than 2.4 billion pesos annually; and
Increase the number of insured agricultural land.
The support of the World Bank is in line with the new approach of the Country Partnership Strategy, which provides a comprehensive package of financial as well as knowledge and convening services. This program is also in line with the objective of inclusive growth with greater productivity.
The Finance and Public Credit Ministry and the National Planning Department will be responsible for coordinating and executing the program. This is a US dollar-denominated loan that matures on August 15th, 2030.