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IDB approves $637 million to Colombia to assist public sector reform and to strengthen agriculture

The Inter-American Development Bank today announced the approval of two loans totaling $637 million for Colombia to assist public sector reform and to enhance the competitiveness of the agricultural sector.


A $550 million loan, the largest ever by the IDB to Colombia, will support the government's effort to make public spending more efficient, improve tax collections, modernize the social security system, and advance efforts by subnational governments to balance their budgets.

The success of the government´s fiscal adjustment program will have a pronounced impact on macroeconomic balances now and in the future. A reduced fiscal deficit will enhance prosects for private investment and ease the pressure on prices of nontradable goods.

The fast-disbursing loan is for a five-year term, with a three-year grace period, at an annual interest rate of 400 basis points over Libor.

The financing is the second operation approved by the Bank for Colombia under its new emergency loan program, adopted by the Board of Governors late last year, to assist countries whose fiscal accounts have been affected by international financial volatilities.

The first emergency loan to Colombia, for a total of $350 million, was approved last December to support modernization of the electricity sector.


A $87 million loan will assist the government in improving the efficiency in which public resources are allocated for agricultural research and ensure that research focuses on high-priority national and regional programs. Phytosanitary and animal health services for the sector will be strengthened, and the quality of products improved. The capacity for innovation will be increased in the medium term.

The program is expected to result in greater access to foreign markets, greater income for producers, and less environmental damage.

An agricultural technology development fund, administered by the Ministry of Agriculture and Rural Development,* will be established to finance research in agricultural production activities, fisheries, and forestry.

These resources will be awarded on a competitive basis to national and regional projects that present solutions to critical problems and innovation priorities.

The Instituto Colombiano Agropecuario and the National Agricultural Science and Technology System will be strengthened.

The IDB loan is for a 20-year term, with a five-year disbursement period, at the variable interest rate, now 6.98 percent. Local counterpart funds total $58 million.

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