The Inter-American Development Bank today approved a $20 million loan to help Peru’s government to implement reforms to improve the efficiency, equity, access and sustainability of water and sanitation services.
The program aims to correct service deficiencies, which include intermittent water supply in many areas, low quality of water, particularly in rural districts, high level of unmetered water, average payment arrears of five months, and rates too low to cover operational costs.
The operation, third in a series of three annual loans for this sector, will support government efforts to implement structural, institutional, legal and regulatory reforms in the following areas:
- The sector’s institutional framework, in order to build the capacity of institutions and improve regional planning capacity, particularly in small communities.
- Financial policy, aimed at establishing criteria for public resources allocation and improving the financial condition of municipal water and sanitation service providers.
- Rate policy, intended to simplify rate structures, target subsidies, and incorporate the concept of environmental costs.
- Service providers management, seeking to institute good corporate governance practices and reporting by operators.
- Private sector participation, aiming to optimize the process for structuring public-private partnerships.
The loan is for a 20-year term, with a 5-year grace period, at a variable interest rate based on Libor.