(M2 PRESSWIRE via COMTEX) The World Bank Board of Directors approved today a US$500 million contingent line of credit to the Republic of Costa Rica to boost the country’s competitiveness and strengthen its public finances and respond to the global financial crisis.
The Development Policy Loan (DPL) with a Deferred Drawdown Option (DDO), Costa Rica: Public Finance and Competitiveness, supports progress towards medium-term strategic objectives such as addressing emerging challenges to continued growth and competitiveness, in particular with respect to infrastructure shortcomings, skills gaps and excessive red tape. In addition, it is aimed at sustaining recent social gains and environmental policies.
‘The greatest source of risk for the economy is the uncertainty regarding the severity and duration of the global economic and financial crisis. The US$500 million Development Policy Loan is integral to Costa Rica’s strategy to manage risks associated with the crisis on different fronts and ensure the sustainability of the country’s social agenda. It will provide a contingent line of credit to the country to be used in case a worsening in the economic environment makes access to financing more difficult than anticipated,’ said Guillermo Zuniga, Minister of Finance of Costa Rica. An upper middle-income developing country of 4.5 million inhabitants and a per-capita Gross Domestic Product of US$6,557 in 2008, Costa Rica is well known for its socio-economic achievement and stable political system. The countryA’s positive economic performance in recent years is due in great part to good macroeconomic management and its fiscal discipline. An improved fiscal performance in 2006 and 2007, and the maintenance of a slight public sector surplus in 2008, permitted increased social spending as well as a reduction in public debt.
As a consequence of the global financial crisis, projections for slower growth are estimated for 2009-2010. In response, central government expenditure will increase from 16.1 percent of GDP in 2008 to 18.9 percent in 2009, due largely to an increase in social and labor-intensive infrastructure spending.
‘From a countercyclical perspective, the Government’s response to the crisis is a step in the right direction as it aims to protect the poor from the adverse effects of the crisis while strengthening the economyA’s ability to recover growth when the external environment improves,’ said Laura Frigenti, the World Bank’s Country Director for Central America. ‘This operation reflects the continuing collaboration between the World Bank and Costa Rica in support of its social agenda,’ emphasized Frigenti.
The loan is designed to support the Government’s efforts aimed at:
— Strengthening public finances and their transparency by enhancing the efficiency of revenue generation and results-based management of expenditures;
— Improving competitiveness by enhancing secondary education attainment, and expanding the beneficiaries of the conditional cash transfer program, ‘Avancemos;’
— Establishing operational regulatory authorities for the telecommunications and insurance sectors, and strengthening the legal framework pertaining to intellectual property rights.
The DPL will be disbursed in a single tranche of US$500 million, payable in 30 years, including five years of grace period. For more information on the World Bank’s work in Latin America and the Caribbean, please visit: http://www.worldbank.org/lac
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