The World Bank In Nicaragua

Nicaragua's economy relies on light manufacturing, services, and agriculture. The country has a small, open economy that benefits from foreign direct investment and remittances. Nicaragua's long-term growth and per capita incomes are heavily constrained by low human capital, significant infrastructure gaps and a weak institutional and business environment. Coupled with high vulnerability to shocks and natural hazards, this makes Nicaragua one of the poorest countries in the region, despite opportunities.

GDP expanded by 3.8 percent in 2022 despite high inflation, global headwinds, and the damage caused by Hurricane Julia. This expansion was driven by robust private consumption fueled by remittances and net exports. 

Nicaragua's economic growth is projected to moderate to 3.1 percent in 2023 due to the global economic slowdown and a tight monetary policy environment. Thereafter, growth is projected to rise modestly, driven by an increase in exports as global economic conditions improve and the continued strong stance of the country in remittances and foreign direct investment.

The average annual inflation in 2022 surged to 10.5 percent - the highest among Central American countries and more than double the average inflation rate over the past decade. Inflation was driven by strong domestic consumption and higher import prices of food and fuel. Inflation is projected to moderate gradually in the medium term in line with the fiscal and monetary tightening and decelerating fuel and food prices.

Poverty measured at the US$3.65 per capita per day poverty line (2017 PPP) is expected to decline to 12.5 percent in 2023 from 13.1 percent in the previous year. This moderate decline is largely driven by sustained growth in remittances coupled with lower inflation and modest but positive growth in employment that reached 64.8 percent during the first half of 2023.

The fiscal deficit is expected to increase over the medium term, reaching an estimated 1.9% by 2025, as public expenditures are likely to increase at a faster pace than revenues. Nonetheless, public debt (share of GDP) is anticipated to decline to 58.2 percent by 2023.

The World Bank has supported poverty reduction measures in Nicaragua through the International Development Association (IDA), the World Bank's fund for the poorest countries. To better reach the country's vulnerable families, IDA projects leverage local initiatives that stretch limited resources further and deliver sustainable results.

Last Updated: Oct 04, 2023

Nicaragua’s Country Partnership Strategy (CPF) for 2018-2022, based on the World Bank’s Systematic Country Diagnosis, aims to address poverty reduction while promoting shared prosperity for more people.

Nicaragua's latest CPF is based on three vital objectives:

1. Investing in human capital, in particular for disadvantaged groups.
2. Enabling private investment for job creation.
3. Strengthening public institutions to improve disaster and external economic crisis risk management.

This strategy focuses on investing both in the human capital of Nicaraguans- health, education, and skills- and in the private sector to create better-paying jobs. It highlights working with young people, women, Indigenous populations, people of African descent and in territories such as the dry corridor and the Caribbean regions.

The work program for 2018-2022 comprises credits on concessional terms and donations from the International Development Association (IDA) for investment projects, knowledge exchanges, technical assistance, and analytical work.

The International Finance Corporation (IFC), the World Bank’s private-sector arm, also plays a lead financing role in the agribusiness and financial sectors. At the same time, the Multilateral Investment Guarantee Agency (MIGA) is open to opportunities to support foreign direct investment in renewable power generation, agribusiness and financial sectors through risk guarantees.

The World Bank’s current portfolio in Nicaragua is US$344 million, including an additional grant of US$15 million provided by the Global Agriculture and Food Security Program. The areas of the portfolio are now: (1) land administration, (2) health, and 3) response to the emergencies of the Coronavirus-19 and the Eta and Iota hurricanes, which includes actions in fisheries, housing, access roads, resilient and nutrition sensitive agriculture.

The Bank’s efforts for the people of Nicaragua include IDA financing (US$326 million) as well as a Japan Social Development Fund (JSDF) small grant of US$ 2.74 million to strengthen agricultural productivity, climate resilience, and nutritional security in selected municipalities of the Dry Corridor; and a Global Agriculture and Food Security Program (GAFSP) co-finance grant of US$15 million.

Hurricanes Iota and Eta struck Nicaragua in November 2020 with catastrophic force, causing widespread damage and loss of life that aggravated the risks of COVID-19 transmission. In response to these emergencies, US$80 million credit was approved in January 2021 to help Nicaragua meet the most pressing needs of its people, especially the poorest and most vulnerable, disproportionately impacted by these tropical disasters.

As part of its global action against COVID-19 and to strengthen the response to the pandemic in Nicaragua, the Bank approved US$20 million in December 2020, plus an additional $US116 million in 2022, to ensure access to COVID-19 vaccines. The projects aim to return the health system to the pre-COVID situation in terms of essential services, medicines, vaccines, and medical and laboratory supplies and equipment. These projects are implemented through the United Nations Office for Project Services (UNOPS) and the Pan-American Health Organization (PAHO). Strict fiduciary requirements are in place to guarantee that these resources benefit Nicaragua's people. 

All operations comply with the Bank's current environmental and social policies, which identify, avoid, and minimize damage to the people and the environment.

Last Updated: Oct 04, 2023

Around 230,000 primary students in the poorest regions of the country, representing 25 % of the national enrollment in primary education, received math, language, and literature textbooks through the Second Educational Sector Support Project (period 2012-2018), completed in fiscal year 23. Almost 2,400 schools were equipped with new furniture. Students from the autonomous regions in the Caribbean received 81,500 bilingual and monolingual books in local languages. Also, more than 427,000 students received backpacks stocked with school supplies and shoes, which parents recognized as an incentive to keep their children in school.

The Project “Alliance for the Quality of Education”, just closed, improved the pedagogical practices of teachers and enhanced the conditions of school environments for learning in selected schools. Among the achievements stand the training of more than 500 school directors and deputy directors, mentoring for more than 1250 teachers and in-service training for primary and preschool teachers. In addition, it built more than 40 schools in prioritized municipalities of Nicaragua. Relevant school materials were translated into indigenous languages.

The Nicaragua Catastrophe Risk Insurance Project provides access to efficient insurance for sovereign risk associated with natural events, such as tropical cyclones, earthquakes, and excess rainfall. The Nicaraguan government has continually renewed its policies for earthquakes, tropical storms and excess rain. This insurance is currently one of Nicaragua’s main disaster risk financing instruments to provide short-term liquidity in the event of a disaster, allowing for immediate response while other financings can be mobilized. Nicaragua received $30.6 million in excess rainfall and tropical cyclone policies following Eta and Iota. This money provided short-term liquidity, allowing the government to respond to the emergency while securing other financing. 

The Third Land Administration Project covered selected municipalities of 4 of the 15 Departments in the country. It helped develop better property rights regulations, benefitting more than 112,000 people, more than half of whom are women. From 2018 to date, more than 94,000,000 families received legal documents for their properties. The CERC emergency mechanism was triggered benefiting over 75,000 people.

A project in Nicaragua's rural areas from 2015 to 2019 helped over 14,000 people, mostly women, youth, and Afro-descendants, improve their access to nutritious food. The project used innovative agricultural and fishery techniques, training, and investments, resulting in a 78.25% increase in agricultural yields and over 8000 beneficiaries adopting new technologies.

The Caribbean Regional Communications Infrastructure Program promoted access to 3G mobile phone service and broadband internet with speeds exceeding 2Mbps in 16 communities along the Caribbean Coast and Río San Juan. These efforts have benefited 39,518 community members, with 450 receiving digital literacy training in Spanish, Mayangna, and Miskito. In addition, the program awarded 1,747 scholarships for English, 910 scholarships for soft skills, and 52 technical skills related to information technology. Further, two open innovation centers have been established in Puerto Cabezas and Bluefields, where young university students have developed nine applications under the guidance of mentors and following an open innovation methodology. Overall, ten digital innovation centers were established around the country.

Through the projects and Integrated Public Provision of Health Care Services, Nicaragua established plans to improve health care quality and prevent chronic diseases in the first level of care. The results highlight the training of 2,518 health workers, the creation and equipping of entomology rooms to prevent diseases transmitted by mosquito bites, and the establishment of hospital waste management plans in 34 of the 64 hospitals. 

Last Updated: Oct 04, 2023