WASHINGTON, October 25th, 2011 – The World Bank Board of Directors approved the US$260 million Second Programmatic and Reform Implementation Policy Development Loan (DPL) today, which supports the Uruguayan Government’s reform program in order to consolidate growth with social equity, providing a line of financing to address the impact of the current uncertainty in global economic affairs.
“This operation strengthens the preventive strategy adopted by the government to reduce the negative effects of any eventual deterioration in the global economy,” said Fernando Lorenzo, Uruguay’s Finance and Economy Minister. “The strategy adopted is crucial to guarantee the continuity of public policies, making sure that the weight of global uncertainty does not fall upon the most vulnerable,” he added.
This loan is financed with a tool called Deferred Drawdown Option (DDO), specifically created for countries without an immediate need for financing but wishing to possess an additional insurance in case an unforeseen deterioration of the external situation occurs.
“In this way, the Uruguayan government seeks to forestall potentially adverse global circumstances,” maintained Penelope Brook, World Bank Director for Argentina, Paraguay and Uruguay, adding that: “this type of loan, available freely and immediately, allows quick and flexible response to the needs expressed by the Uruguayan government.”
The loan supports a series of reforms in three key areas identified and prioritized by the Government:
- Results-based public sector management to consolidate macroeconomic stability and improve administrative efficiency. This includes the formulation of a results-based budget, as well as the promotion of an e-government platform, and an increase in online transactions.
- Improve the competitiveness of Uruguay’s economy, attracting quality investments, through improvements to the business climate, access to financing and trade facilities.
- Greater social inclusion, through greater coverage, equity and efficiency of social services (education, health and social protection).
The Second Programmatic and Reform Implementation Policy Development Loan falls under the framework of the 2010-2015 World Bank Partnership Strategy with Uruguay, whose pillars include: i) reducing macroeconomic vulnerability and strengthening public sector administration, ii) improving competitiveness and infrastructure, iii) protecting the environment, mitigating the effects of climate change and strengthening family agriculture and, iv) greater social inclusion and equity.
In particular, the loan reinforces Bank cooperation in terms of improving the coverage and efficiency of social security systems, primary education and the implementation of public health reforms.
The DDO operates as a stand-by line of credit for the Government, with funding available for the next three years and liable to be used with flexibility, as needed. The maturity period for this loan is 20.5 years, with a 15-year grace period, and a variable interest rate.