IDB supports Argentina’s new program to strengthen the management of Provinces

REFORMS WILL RATIONALIZE REVENUES THAT NEGATIVELY AFFECT GROWTH AND IMPROVE THE EFFICIENCY OF TAX COLLECTION AND PROVINCIAL INVESTMENT

The Inter-American Development Bank approved a Credit Line for Investment Projects of US$ 450 million and a first individual operation of US$ 150 million under this credit line, in support of  a program to strengthen provincial management in Argentina.

The program aims to contribute to provincial fiscal sustainability to foster growth through improved management of revenues, expenditure and public investments in the provinces, as well as the design of the Argentine fiscal federalism and the implementation of investment projects.

It is estimated that strengthening actions and public investment projects will encourage improvements in fiscal management by linking them to the financing of projects and ensuring that those improvements in provincial investment management are indeed implemented.

This is the second program Argentina will implement to improve provincial management and the first individual operation under its framework will benefit six provinces. The first, supported by the IDB with US$120 million in financing, was approved in December 2016 and benefited Corrientes, Salta, Mendoza and Neuquén provinces.

The first individual operation’s specific objectives under this Credit Line are to increase the share of low-distorted revenues in total revenues and improve the efficiency of public expenditure management and public investment.

The provinces and citizens of Chaco, Entre Ríos, Jujuy, Misiones, Río Negro, and Tierra del Fuego will be direct beneficiaries. In addition, all other provinces will result benefited by strengthening the design of Argentine federalism and supporting fiscal sustainability.

Components of the program include the strengthening of tax and financial administration, whose goal is to increase the share of low-distorting revenues in total revenues and increase the efficiency of public spending and investment, as well as support for provincial fiscal sustainability.

The US$450 million Investment Projects Credit Line and the first individual US$150 million loan operation have a 25-year repayment term with a 5.5-year grace period and an interest rate based on Libor. The first operation has a local counterpart of US$50 million.