Guatemala: World Bank Approves USD 350 Million Loan

The World Bank Board of Directors approved a USD 350 million Development Policy Loan (DPL) for the government of Guatemala.

Wednesday, July 29, 2009

With the objective of continuing to support the country’s efforts to improve its fiscal and institutional policies and mitigate the impact of this global crisis.

The purpose of this loan is to contribute to the government’s efforts to improve macroeconomic stability, governance and transparency; to expand opportunities for vulnerable groups through a better focalization of social programs and the promotion of growth and productivity to generate quality jobs.

The government of Guatemala has demonstrated its commitment to mitigate the impact on the poor of this global crisis and has placed a greater emphasis on those policy reforms needed for its economic and social development. In view of the current international scenario, the government has adjusted its reform, priority and action plans; and this loan aims to support the success reached in key areas”, Laura Frigenti, World Bank Director for Central America, said.

This new operation is the last in a series of two Development Policy Loans, and builds on the results obtained during the first stage. It supports the government’s strategic program to reinforce Guatemala’s capacity to grow and reduce poverty and inequality.

The project’s objectives include:
* Maintaining fiscal space, to be used in priority public spending.
* Reinforce the effectiveness of the Mi Familia Progresa cash transfer program through a program of increased monitoring and evaluation of its design and achievements.
* Improving the governance and transparency of public finances and spending management.
* Increasing access to financing and financial markets through a reform of the legal financial framework and public debt administration.

The loan is part of the Strategic Alliance between the World Bank and Guatemala for the 2009-2012 period. As well as the support areas mentioned as part of the project approved today, the strategy contemplates supporting the following areas of the government’s development program: education, health and nutrition, investment in rural infrastructure, improvements in productivity, energy and disaster mitigation, among others.

The USD 350 million Development Policy Loan contemplates a maturity period of 26.5 years, including a grace period of 8.5 years.

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The Bank's press release states that the main objectives of this loan are:

-To attend to fiscal and financial needs during a year of economic slowdown.

-To improve economic growth outlooks, increase fiscal spaces address public expense priorities, and contribute to improving the country’s governance and poverty reduction.

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