WB/Paraguay: Financial Inclusion and Tax Equity to Benefit the Poorest
Project Seeks to Strengthen Fiscal Sustainability and Social Program Efficiency
The World Bank Group’s (WBG) Board of Executive Directors approved a US$100 million loan today to support the Paraguayan government’s efforts to strengthen the sustainability, equity and transparency of fiscal management; improve the efficiency of social programs and increase access to financial services among the most vulnerable population.
“This new operation will allow us to take an important step towards strengthening specific social programs, as well as fiscal sustainability, equity and transparency. Paraguay needs to have at its disposal every financial tool available to fight social inequality, poverty and exclusion,” said Santiago Peña Palacios, Paraguay’s Minister of Finance. “Actions such as these will help us move towards that goal, and also represent a clear signal to the population that we are working to build a better society, an inclusive Paraguay.”
Among other priorities, this financing will support efforts to improve fiscal risks. It will also contribute to the efficiency of the Senior Adults social protection program. As well as promoting banking penetration among Tekopora (conditional cash transfer program) beneficiaries. In this way it will foster the financial inclusion of that program’s direct beneficiaries, as well as reduce transaction costs at the Social Action Secretariat via the provision of e-payment services to mobile phone users, for example.
“We intend to accompany a sustained reduction in poverty levels that is reflected in renewed growth, with better-targeted social programs,” explained Jesko Hentschel, World Bank Director for Argentina, Paraguay and Uruguay. “Improvement in fiscal policy will favor the sustainability of social programs; in this way we will contribute to improving the living conditions of the poorest 40 percent of Paraguayans,” he indicated.
The project falls under the World Bank’s 2015-2018 Country Partnership Strategy with Paraguay, which supports that country’s efforts to reduce extreme poverty to 9 percent by 2018 and increase income levels among the poorest 40 percent of the population. The cooperation program is focused on protecting the poorest from economic volatility risks, guaranteeing their access to quality public services and promoting their financial inclusion. As cross-cutting elements that will help achieve these objectives, it will support the development of an innovative and productive private sector that creates jobs and opportunities, as well as civil society, in order to strengthen its social accountability capacity.
The IBRD’s portfolio in Paraguay includes four investment loans totaling US$375 million. The Bank also administers a portfolio of 10 trust funds totaling US$5.6 million. For its part, the International Finance Corporation’s portfolio totals US$292 million in more than 25 projects backing the development of a competitive private sector, with a special emphasis on guaranteeing regional integration through trade.
The project approved today will be financed via a Development Policy Loan - Deferred Drawdown Option (DPL-DDO), a tool specifically created for countries that wish to have insurance in case an unforeseen deterioration in the external environment affects the country’s economy. The US$100 million loan comes from the International Bank for Reconstruction and Development, the World Bank Group institution for medium-development countries, has a 29-year maturity period and a 9-year grace period.
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