The Inter-American Development Bank (IADB) has approved a US$200mn loan to Peru to support government efforts to strengthen and improve its capacity for management, budgeting, public investment and the formation of partnerships with the private sector.
The project was structured using a programmatic approach to help Peru meet its external financing needs for 2005 and may be followed by IADB loans for equal amounts in 2006 and 2007 to support the continuity of the programme.
Under the framework Peru will modernise and streamline the national public investment system and improve public management quality, expenditure monitoring and administrative and financial systems. A Fiscal Stabilisation Fund will be established as part of a broad effort to strengthen and stabilise the decentralisation process.
A conceptual model will be constructed as a tool to promote greater public-private partnership in infrastructure development to raise investment efficiency and resource levels using a better distribution and management of the risks.
A results-based strategy will be employed to the restructuring of budget management and the evaluation of public expenditure applying the use of incentives, and to the upgrading of the efficiency, quality and transparency of regulatory and management systems.
As part of the lending operation Peru is committed to continuing its ongoing measures to ensure a macroeconomic environment consistent with the government’s objectives to achieve greater effectiveness of its public management systems.
The bank also has approved a parallel technical cooperation loan of US$5mn to support the implementation of the programmatic operation and a US$450,000 grant specifically for the related Strategy and Action Plan for Development Effectiveness and Management by Results in Peru.
The policy-based, programmatic loan reflects the IADB’s strategy of support for Peru’s efforts to modernise and decentralise the state while increasing national competitiveness and productivity. The loan, to be delivered in a single tranche, is for a 20-year term, with a five-year grace period, at a floating interest rate based on Libor.