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The Inter-American Development Bank (IADB) has announced the approval of a US$28mn soft loan to Guyana to support a reform agenda aimed at ensuring continued fiscal sustainability and the transparent and efficient management of public finances.

The project is the result of a close process of dialogue between the bank and the Guyanese authorities and will support a series of legislative and administrative steps designed to increase efficiency and equity of the tax system and improve public expenditure management and transparency. These measures were agreed upon by the Guyanese government and the international community on the basis of the recommendations of a series of technical assessments conducted by international agencies over the past two years. The steps were taken within the framework of the Enhanced HIPC Initiative – the international effort to provide debt relief to heavily indebted poor countries, including Guyana.

The IADB-financed programme, whose implementation will be led by the ministry of finance, takes the form of a hybrid lending operation consisting of a policy-based financing component and an investment component. With respect to the first, the initial phase of the programme is aimed at establishing a modern legislative framework for fiscal and financial management, with subsequent phases supporting the effective implementation of the reforms. The IADB, through its dialogue with the authorities, has provided substantial assistance and guidance with respect to the prioritisation and sequencing of the various reforms.

For the investment component, resources will be invested in the development and implementation of a comprehensive modernisation plan for the Guyana Revenue Authority, as well as in the expansion of an integrated financial management system recently installed with the support of the Canadian Development Agency.

At the same time, in supporting the implementation of constitutional reforms adopted in 2001 in the areas of public audit and financial and fiduciary oversight, the programme will strengthen the role of parliament in the oversight of fiscal and financial management.

The programme reflects the IADB strategy of assisting Guyana in maintaining a sound macroeconomic framework and modernising the state.

The IADB loan is for a 40-year term, with a 10-year grace period, at a 1% annual interest rate during the grace period and 2% thereafter.