$400 million loan will help increase private participation in infrastructure projects and improve country’s competitiveness

The Inter-American Development Bank (IDB) has approved a $400 million policy-based loan (PBL) for Colombia aimed at fostering private investments in infrastructure management and supply, improving the country’s competitiveness and stimulating economic growth.

Private participation is a centerpiece in the Colombian Government efforts to close the productive and social infrastructure gap and improve the quality of related services. The loan will help adapt and develop the regulatory framework needed to boost up private investment in this area and enhance national and regional institutional capabilities to implement Public Private Partnerships (PPPs). The funds will also finance investment programs aimed at boosting up infrastructure in sectors that are critical to the country’s growth, by structuring sectorial pilot projects and developing adequate tools and technical standards.

During the past decade Colombia invested an annual average of 3.2 percent of GDP in productive infrastructure, well below the 5 percent-7 percent level recommended for the region. This low degree of investment activity has generated a major infrastructure gap, with a direct impact on competitiveness and economic growth.

In order to ensure that Colombia becomes a high-income country with greater social mobility, the IDB’s country strategy calls for accelerating annual economic growth to 6 percent and boosting up productivity to 2 percent. Within this context, and amid a limited medium-term public investment scenario, an increase in private participation through this kind of actions can play a key role in closing the infrastructure gap and improving competitiveness.

Available to borrowing IDB members, PBLs are fast-disbursing, budgetary-support operations. PBLs do not set aside resources to any specific investment, and their disbursements are conditional to verification of compliance with the agreed-upon reforms.

The IDB’s loan is for a 20-year term, with a 5.5-year grace period and an interest rate based on LIBOR.

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The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source oflong-term financing for economic, social and institutional development in Latin America and the Caribbean. The IDB also conducts cutting-edge research and provides policy advice, technical assistance and training to public and private sector clients throughout the region.