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Social Reform Program
This program aims to strengthen the social safety net and rationalize public social expenditure in Colombia.

Project Detail



Project Number


Approval Date

December 19, 2001

Project Status


Project Type

Loan Operation





Lending Instrument

Préstamo de Apoyo a Reformas de Política

Lending Instrument Code



PBL (Policy Based Loan)

Facility Type


Environmental Classification


Total Cost

USD 540,000,000.00

Country Counterpart Financing

USD 0.00

Original Amount Approved

USD 390,000,000.00

Financial Information
Operation Number Lending Type Reporting Currency Reporting Date Signed Date Fund Financial Instrument
1381/OC-CO Sovereign Guaranteed USD - United States Dollar Ordinary Capital Single Currency Facility
Operation Number 1381/OC-CO
  • Lending Type: Sovereign Guaranteed
  • Reporting Currency: USD - United States Dollar
  • Reporting Date:
  • Signed Date:
  • Fund: Ordinary Capital
  • Financial Instrument: Single Currency Facility

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Implementation Phase
Programa de Reforma Social [415514].PDF
Published Dec. 31, 1999
Social Reform Program [412774].PDF
Published Dec. 31, 1999
Closed Phase
CO0252_ Programa de Reforma Social - PCR [222153].DOC
Published Dec. 31, 1999

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Published 2021
Fiscal Rules and the Behavior of Public Investment in Latin America and the Caribbean: Towards Growth-Friendly Fiscal Policy?: The case of Argentina
This paper analyzes the implementation of Fiscal Rules (FR) in Argentina. Several clear attempts to establish a FR at the national level are identified. The analysis suggests that the environment matters. The only FR that was binding in the period was approved in 2004 during an economic boom, with the country under a program with the IMF and with high political support. During the world financial crisis the expenditure ceilings were relaxed, however, and current primary expenditures soared. Simulations show that a countercyclical fund could have been implemented even after reducing highly distorting taxes at the federal and provincial levels, and at the same time securing a high level of capital expenditure as a share of GDP, had Argentina complied with the 2004 FR. Moreover, an econometric exploration of the link between flexible FRs and public investment finds that a flexible FR helps to mitigate the negative effects of fiscal consolidations on provincial public investment. Based on the previous analysis, guidelines for a proposal for a FR in Argentina are provided.
Published 2021
Se buscan empleos de calidad: políticas activas y pasivas de empleo en Colombia. Informe para la Misión de Empleo
Colombia sobresale a nivel internacional por sus grandes dificultades para generar empleos de calidad. Mitigar los riesgos asociados a la pérdida de empleo, a los que tantos ciudadanos están expuestos, difícilmente se puede hacer sin apoyo del Gobierno. En este documento se analiza la oferta en Colombia de dos tipos de políticas públicas: las políticas activas y pasivas. Se muestra que, a pesar de los esfuerzos que ha hecho Colombia para articular las políticas activas y pasivas alrededor de un sistema integrado y de los recursos que ha invertido, la oferta está fragmentada en programas sin una visión unificada y con resultados débiles en muchas dimensiones. La mayor parte de los trabajadores colombianos recibe una baja o nula protección durante los periodos de desempleo o cesantía. Se trata de un problema estructural y antiguo cuyas consecuencias saltaron a la vista de manera dramática ante la crisis que desencadenó la pandemia. Fortalecer las políticas activas y pasivas requiere de consensos políticos importantes, cambios regulatorios e inversiones para el fortalecimiento institucional. El documento presenta una serie de lineamientos de reforma, para mejorar el diseño e implementación de las políticas activas y pasivas y fortalecer la institucionalidad en la que operan. También se discute su complementariedad con la política social y la regulación laboral. Este documento fue escrito en el marco de la Misión de Empleo que convocó el Gobierno de Colombia en el año 2020.
Published 2021
The Output Effects of Fiscal Consolidations: Does Spending Composition Matter?
This paper studies whether changes in the composition of public spending affect the macroeconomic consequences of fiscal consolidations. Based on a sample of 44 developing countries and 26 advanced economies during 1980-2019, results show that while fiscal consolidations tend to be on average, contractionary, the size of the output fall depends on the behavior of public investment vis-a-vis public consumption during the fiscal adjustment, with heterogeneous responses growing over time. When public investment is penalized relative to public consumption and thus, its share in public expenditures decreases, a 1 percent of GDP consolidation reduces output by 0.7 percent within three years of the fiscal shock. In contrast, safeguarding public investment from budget cuts vis-a-vis public consumption can neutralize the contractionary effects of fiscal adjustments on impact, and can even spur output growth over the medium term. The component of GDP that mostly drives the heterogeneity between both types of adjustments is private investment. The results hold up to a number of robustness tests, including alternative identification strategies of fiscal shocks. The findings have policy implications for the design of fiscal adjustment strategies to protect economic growth as countries recover from the coronavirus pandemic.
Published 2022
Research Insights: Do Changes in the Composition of Public Spending Affect the Macroeconomic Consequences of Fiscal Adjustments?
Si bien las consolidaciones fiscales tienden a ser contractivas, el tamaño de la caída del producto depende de la composición de los recortes del gasto público. Una consolidación fiscal del 1% del PIB implementada mediante la reducción de la inversión pública en lugar del consumo público reduce el producto en un 0,7% en un plazo de tres años. En cambio, proteger la inversión pública de los recortes presupuestarios en relación con el consumo público puede neutralizar los efectos contractivos de los ajustes fiscales en el corto plazo, e incluso puede estimular el crecimiento del producto a mediano plazo.
Published 2022
First Regional Policy Dialogue on Cultural and Creative Industries with an Intersectoral Approach: The role of the cultural and creative industries in the economic reactivation of Latin America and the Caribbean
This document contains a report on the "First Regional Policy Dialogue" on cultural and creative industries with an inter-sectoral approach, with the aim of bringing together and sharing experiences and best practices from the public and private sectors. This first dialogue focused mainly on four lines of action: Urban and local development strategies through culture and creativity; Actions to strengthen the competitiveness of the creative sector through digitization; Opportunities for independent workers in the creative sectors; Financial mechanisms to promote the creative economy.
Published 2022
Options for a Reform of the Mexican Intergovernmental Transfer System in Light of International Experiences
This paper focuses on the design of intergovernmental transfers to reduce vertical and horizontal fiscal imbalances and improve the performance of subnational governments. It provides an overview of international experiences, especially of large federations, with a view to devising viable options for reform of the transfer system in Mexico. While there is no one-size-fits-all ideal model of design and implementation of intergovernmental transfer systems, this analysis points to some lessons that can inform reforms, including the need to view intergovernmental transfers as an integral part of the overall system of intergovernmental fiscal relations; the use of different types of intergovernmental transfers that are best suited to fulfill different objectives; and the incorporation of equalization schemes to address regional disparities. In the light of these experiences, we find that the current Mexican transfer system is too fragmented, is linked to volatile oil revenues, involves substantial discretion in the allocation of a significant portion of the transfers, and lacks sufficient equalizing power. This paper presents and discusses possible reform options and demonstrates that it is altogether possible to reduce transfer dependence to promote effort and fiscal responsibility; simplify the system to increase predictability and ease its administration; eliminate discretion to increase transparency and establish stronger subnational budget constraints; and improve fiscal equalization to promote equity in subnational service delivery. Careful consideration of political economy dynamics is given in the simulations of possible reforms, with a view to minimizing short-term gains and losses as well as political opposition.
Published 2022
Municipal Fiscal Health in Latin America
Cities are important drivers of productivity, innovation, and economic growth. To achieve their full economic potential, cities must deliver high-quality public services to their residents and businesses. This is very important for Latin American cities given rapid urbanization and the deepening of decentralization reforms in many countries. The extent to which they can carry out all of these responsibilities depends at least partially on their fiscal health, ability to meet their service, infrastructure, and financial obligations with the revenue available to them. This study assesses the fiscal health of 80 main cities in Brazil, Colombia, Mexico, and Peru, from 2010 to 2017, and explores the factors that drive it. A primary purpose is to provide a methodology for cities to assess their own fiscal health, given available data. As such, it helps to determine whether fiscal distress is building up in selected large cities across the region and to understand whether and how financial solvency, public service delivery, and the maintenance and expansion of urban infrastructure may be compromised.
Published 2022
Allocative Efficiency of Government Spending for Growth in Latin American Countries
There is scant empirical economic research regarding the way that Latin American governments efficiently allocate their spending across different functions to achieve higher growth. While most papers restrict their analysis to the size of government, much less is known about the composition of spending and its implications for long-term growth. This paper sheds light on how allocating expenditures to investment in quality human and physical capital, and avoiding waste on inefficient expenditures, enhance growth in Latin America. This paper uses a novel dataset on physical and human capital and detailed public spending that includes -for the first time- Latin American countries, which is categorized by a cross-classification that provides the breakdown of government expenditure, both, by economic and by functional heads. The database covers 42 countries of the OECD and LAC between 1985 and 2017. There are five main results. First, the estimated growth equations show significant positive effects of the factors of production on growth and plausible convergence rates (about 2 percent). The estimated effect of the physical investment rate is positive and significant with a long-run elasticity of 1.2. Second, while the addition of years of education as a proxy for human capital tends to have no effect on growth, the addition of a new variable that measures quality-adjusted years of schooling as a proxy for human capital turns out to have a positive and significant effect across all specifications with a long-run elasticity of 1.1. However, if public spending on education (excluding infrastructure spending) is added to the factor specification, growth is not affected. This is mainly because, once quality is considered, spending more on teacher salaries has no effect on student outcomes. Therefore, the key is to increase quality, not just school performance or education spending. Third, both physical and human capital are equally important for growth: the effect of increasing one standard deviation of physical capital or human capital statistically has the same impact on economic growth. Fourth, increasing public investment spending (holding public spending constant) is positive and significant for growth (a 1% increase in public investment would increase the long-term GDP per capita by about 0.3 percent), in addition to the effect of the private investment rate. However, the effect of public spending on payroll, pensions and subsidies does not contribute to economic growth. Fifth, the overall effect of the size of public spending on economic growth is negative in most specifications. An increase in the size of government by about 1 percentage point would decrease 4.1 percent the long-run GDP per capita, but the more effective the government is, the less harmful the size of government is for long-term growth.
Published 2022
¿Cómo medir el gasto público climático en América Latina y el Caribe?
Combatir el cambio climático requiere hacer consistente el conjunto de flujos financieros públicos y privados con los objetivos internacionales establecidos en el Acuerdo de París. Como parte de esos esfuerzos se requiere desarrollar mecanismos de financiamiento y sistemas de información que permitan identificar, priorizar y evaluar los esfuerzos en el financiamiento climático de los países. En este contexto, un tema crucial es la identificación y evaluación del gasto público climático en los presupuestos nacionales.
Published 2023
Cuatro tendencias sobre el uso del Presupuesto por Resultados en América Latina y el Caribe en la pospandemia
Los presupuestos son uno de los instrumentos de política pública más importantes de los gobiernos, ya que reflejan sus compromisos y estrategias, priorizando áreas en la agenda de los gobiernos.  Por eso, su buena gestión es un elemento clave para asegurar la eficiencia y la efectividad del gasto público.
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