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IDB, Bolivia sign first of two soft loans to support municipal management reform in Bolivia

SANTIAGO, Chile - Bolivian Finance Minister José Luis Lupo and Inter-American Development Bank President Enrique V. Iglesias today signed documents for a $47 million soft loan - the first of two financing operations that will provide Bolivia with a total of $87 million to strengthen public sector management at the municipal level and to fund local investment projects.

The first phase of the program will continue for five years. The second phase, which also will have a term of five years, will be supported by a $40.3 million IDB loan, subject to approval by the IDB Board of Executive Directors. Resources for both operations are to be provided by the Fund for Special Operations, the Bank’s soft-lending window.

The program is designed to strengthen the decentralization process in Bolivia by promoting better municipal management and fiscal administration, coordination between municipalities and national agencies, and resources allocation. It will also provide funds for investments in areas such as roads, education, public lighting, erosion and flood protection, and solid waste collection.

In order to be eligible for investment resources under the program, municipalities must first submit and gain approval of institutional adjustment plans, which will be evaluated by a technical team of the National Regional Development Fund. The plans will contain institutional and financial analyses of the municipalities and describe measures that will be taken to improve management and the fiscal situation.

A component of the program will finance modern municipal land registry systems that will increase the tax base through improved mapping and asset identification.

The program will also introduce efficiency criteria in the transfer of resources from the central government to municipalities, rationalizing spending at the various levels of government, increasing net fiscal savings, and providing incentives for better use of municipal fiscal potential.

The program will be carried out by the Treasury Ministry through the National Regional Development Fund and the National Fund for Productive Social Investment.

The total cost of Phase I of the program is $54.6 million. The IDB loan is for a 40-year term, with a 10-year grace period, at an annual interest rate of 1 percent during the grace period and 2 percent thereafter. Local counterpart funds total $7.6 million for Phase I and $5.6 million for Phase II.

The program will be carried out by the Treasury Ministry* through the National Regional Development Fund and the National Fund for Productive Social Investment.

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