The FINANCIAL — The World Bank Board of Executive Directors on February 11 approved two projects to promote productivity in Peru at a time when the international economic environment is less favorable and the country’s productive engines will be key to reignite growth. The projects will on the one hand, increase human capital and competitiveness, and on the other, strengthen public expenditure management and risk management in public-private partnerships.
“This support from the World Bank recognizes the strength of our public policy reforms geared at improving the quality of education and boosting the country’s productivity, as well as strengthening the management of public finances and budget processes,” said Alonso Segura, Minister of Economy and Finance of Peru. “These resources provide the country with a contingent financial support, in case of necessity, for example to face volatility in international financial markets, which allows for more flexibility in the prudent management of the fiscal budget, in a preventive manner. These operations also ensure that the progress achieved in these important reforms is not put under risk.”
More specifically, the World Bank through the Boosting Human Capital and Productivity Development Policy Financing with a Deferred Drawdown Option project, for US$1.25 billion, seeks to support the Government of Peru in its efforts to strengthen the quality of public education and improve the business environment for enterprises by reducing entrance, operation and market exit costs. It also supports the measures taken by the country in the creation of a simplified customs regime that facilitates exports and access to international markets, among other actions, according to the World Bank.
The Public Expenditure and Fiscal Risk Management with a Deferred Drawdown Option project, for US$1.25 billion, supports the steps taken by the Government to improve public expenditure management in sub-national governments in order to promote fiscal responsibility and improve their administration, efficiency and transparency. The project also supports improvements in the planning and evaluation processes of public-private partnerships.
“The World Bank and the Government of Peru have agreed on a strategic cooperation to improve the quality of education, productivity and the impact of public spending,” said Alberto Rodriguez, World Bank Director for Bolivia, Chile, Ecuador, Peru and Venezuela. “The Bank is committed to continue its support to the reforms deemed important to promote growth and continue social gains in Peru.”
The financial instrument used for these two projects is a contingency loan available to the authorities in the event of important economic or environmental shocks, thus protecting financial plans.
These two loans are consistent with the Multiannual Macroeconomic Framework Plan of Peru for the 2016-2018 period, and support policies contained in the Bicentenary Plan: Peru towards 2021, the National Competitiveness Plan 2014-2018 and the National Education towards 2021 Project.
The two credit lines provide a disbursement period of three years, extendable to six and a repayment period of 14 years, with 13.5 years of grace.