CO Programmatic Fiscal and Institutional Structural Adjustment Loan

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The Programmatic Fiscal and Institutional Structural Adjustment Loan (FIAL) Project for Colombia is the first of four loans using a Programmatic Structural Adjustment Loan (PSAL) instrument. It will support the first phase of the constitutional referendum; the enactment of the tax reform law; modernization of the tax administration; improvement of budget management with modern tools and legal reforms; prevent massive losses to the State from judicial claims; strengthen the public sector procurement system; improve performance through management contract for government agencies; promote the development of a sound fiscal responsibility legal framework; support a coherent and comprehensive reform implementation process; and the initial measures that comprise the building blocks for subsequent public sector reform initiatives supported by the overall program. A single tranche amount of US$300 Million will be disbursed in March 2003. The timing of the first loan is calibrated to support the government efforts to deliver an immediate confidence building signal to the markets through major reforms that have recently been approved or are being implemented. On balance consequently, the FIAL is judged to be a high-risk, high-return project. Therefore, it is essential to maintain a close working relationship with the Government of Colombia, and to provide ample, ongoing dialogue and assistance during implementation.