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IDB approves $20 million loan to Panama for rural electrification program

Program includes incentives for private sector to provide sustainable electricity services to rural areas without access to electricity 

The Inter-American Development (IDB) announced approval of a $20 million loan to Panama to finance a rural electrification program that will promote public and private investment to provide service for more than 10,000 rural households, located mostly in very poor remote areas.

The program will also provide access to electricity for 107 schools and 21 health centers, thereby increasing Panama’s electricity coverage rate will rise to approximately 81 percent of Panama’s rural households by 2018.

The general objective of the program is to help improve the quality of life of Panama’s rural population by increasing access to sustainable electricity services in the poorest communities. This program will seek to promote public-private efforts by financing incentives to invest in grid-extension projects and off-grid systems in order to provide reliable electricity service to rural communities as well as to improve the Panamanian Government’s institutional capacity for the formulation, execution, oversight and evaluation of rural electrification projects.

The project includes a system of subsidies for new investments that will motivate private enterprises to invest in rural electrification, through either grid extension or renewable energy projects in isolated areas. Among the eligible renewable energy alternatives are small hydroelectric projects, wind power plants, and solar photovoltaic systems.

The IDB has been supporting the Government of Panama’s efforts to increase national electricity coverage levels through the Rural Electrification Program (REP) since 2006. During the REP’s Phase One from October 2006 until December 2013, IDB loans totaling approximately $20.8 million funded electricity extension programs in numerous rural communities and off-grid power systems in the indigenous comarcas of Guna Yala and Embera Wounnan. The REP’s Phase One extended electricity coverage to more than 12,000 households and numerous schools and hospitals in Panama’s poorest rural communities.

The $10 million IDB loan is for a 25-year term, with a 54 month grace period and an interest rate based on LIBOR and $10 million from the China Co-financing Fund for Latin America and the Caribbean. Local counterpart contribution totals$2.25 million.

This project is framed within the global goals of the Sustainable Energy initiative for all (SE4ALL). It is promoted by a United Nations initiative that the IDB committed to supporting, an initiative that seeks universal access to electricity by 2030.

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