Peru to Advance Fiscal Reforms to Boost Economic Growth with Support from the IDB

WASHINGTON — Peru has secured a $550 million loan from the Inter-American Development Bank (IDB) to implement fiscal reforms aimed at boosting economic growth through increased productivity and private investment.

This loan is the first in a series of two operations that form part of a program designed to close structural gaps in state capacity. It supports reforms focused on strengthening fiscal policy and management to achieve two main goals: improving public spending efficiency and enhancing the efficiency of the tax system.

The credit will support policies to strengthen systems for public investment management, budgeting, public procurement, and corporate governance of state-owned enterprises. Specifically, the project will support measures to improve the prioritization, review, and execution of public investment projects, especially at the subnational level. 

It will also promote better resource allocation and support the regulation of the new public procurement law, which incorporates value-for-money and sustainability criteria. Additionally, the project will support the introduction of mechanisms to encourage the participation of women-led businesses and those that employ people with disabilities in the public procurement market.

The project will also support reforms aimed at simplifying the tax system, ensuring greater sufficiency and certainty in tax policy, and achieving more efficient tax administration. It will back the design of reforms to simplify tax regimes and encourage the formalization of small and medium-sized enterprises, as well as measures to improve e-commerce tax collection and transfer pricing regulation for multinational companies, in line with OECD standards. Actions will also be taken to facilitate tax compliance, including the launch of a cooperative compliance program for large taxpayers.

The IDB policy-based loan, approved by its Board of Executive Directors, has a 19-year term, with a 6.5-year grace period, and an interest rate based on SOFR.