WASHINGTON, D.C., March 25, 2021. – The World Bank Board of Directors today approved a flexible loan for US$ 750 million. These resources will enable Peru to continue efforts to mitigate the social and economic impacts of the COVID-19 pandemic and strengthen the country's foundations for its economic recovery and development. This is a Development Policy Financing operation focused on supporting (i) the Peruvian government response to the pandemic, and (ii) the necessary reforms for a more inclusive, environmentally sustainable and resilient recovery.
"The crisis triggered by the pandemic is an opportunity to rethink Peru’s future and improve the foundations of development,” said Marianne Fay, World Bank director for Bolivia, Chile, Ecuador and Peru. "Returning to the path of development requires strengthening institutions to enable them to address the effects of the pandemic and implement reforms that lead to growth that favors all people and protects them from climate risks,” she said.
Peru deployed a rapid, ambitious response to the COVID-19 onslaught, equivalent to 20 percent of its GDP, thanks to its robust macroeconomic situation. However, the precariousness of the public health system and the country's structural challenges limited its ability to prevent the devastating effects of COVID-19 on people's lives. This placed Peru among the countries in the world with the worst combination of deaths, job losses and economic costs. The arrival of a second wave of infections threatens to exacerbate these impacts.
In response to these challenges, the program will support key government reforms for social protection. To this end, it will help strengthen social protection networks and expand cash transfer programs and digital payments for vulnerable households. The expansion of the National Household Registry allowed an additional 2.5 million households to receive social support vouchers. The reforms aim to increase the percentage of vouchers transferred digitally from 30 percent for the first Yo Me Quedo en Casa I Voucher (April 2020) to 80 percent for the second Universal Family Voucher, which will be implemented until May of this year.
Additionally, the program will support structural reforms to create a stronger foundation for economic recovery. To this end, the program addresses the market failures that became evident during the pandemic and that have deprived households and businesses of economic opportunities, such as the lack of market competition, precarious housing and limited access to financial services. For example, these reforms are expected to lead to the activation of one million bank accounts linked to the national identity document (DNI) by March 2020 as well as to the reduction of the gender gap in bank account ownership, from 17 percentage points in 2019 to 10 percentage points by 2021. The actions supported will also help achieve more ambitious climate mitigation goals.
World Bank Group Response to COVID-19
The World Bank, one of the largest sources of funding and knowledge for developing countries, is taking broad, fast action to help developing countries respond to the health, social and economic impacts of COVID-19. This includes US$12 billion to help low- and middle-income countries purchase and distribute COVID-19 vaccines, tests and treatments, and strengthen vaccination systems. The financing builds on the broader World Bank Group COVID-19 response, which is helping more than 100 countries strengthen health systems, support the poorest households, and create supportive conditions to maintain livelihoods and jobs for those hit hardest.
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