Colombia will strengthen its sub-national fiscal stability by monitoring, tracking and establishing more effective control over the finances of territorial entities and decentralized national entities with a US$200 million loan approved by the Inter-American Development Bank.
The program will help these entities to achieve greater cost effectiveness, improve the quality and timeliness of territorial tax information and boost territorial tax revenues.
Colombia’s national strategy seeks to consolidate the gains of decentralization within the framework of fiscal responsibility that the country launched a decade ago. Furthermore, it expects to improve the application of resources from Sistema General de Participaciones (General Participation System) and meet the goals of equality, efficiency, quality and sustainability of sector spending, with emphasis on the areas of education and health.
Among the results expected from monitoring, evaluating and controlling territorial entities and national decentralized entities is that at least 32 states and 31 municipalities will be monitored through a set of sector indicators of coverage and quality of spending in their health and education services.
In the area of strengthening and harmonizing the territorial tax information system, by the conclusion of the project it is expected that 80 percent of territorial entities will report—through a single territorial financial form—their financial data, capital expenditure and debt service, thereby simplifying the reporting process.
Territorial tax revenues are expected to increase by at least 5 percent in real terms between 2008 and 2011, and at least 20 of Colombia's 31 departmental capital cities are expected to be regularly publishing their annual estimates of tax expenditure in their medium-term fiscal framework by then.
The IDB loan has a repayment period of 20 years and 5 years of grace, with an interest rate based on the LIBOR.