CO Second Programmatic Sustained Growth and Income Convergence DPL

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This Second Programmatic Sustained Growth and Income Convergence Development Policy Loan (DPL) continue to support the Colombian Government’s efforts to sustain economic growth and increase productivity. This DPL for EUR 624.2 million (equivalent to US$700 million) is the last in a series of two single tranche operations. It comes in the context of lower export demand for commodities, worsening terms of trade, and the prospects of higher borrowing costs that are affecting a large number of emerging economies. The DPL series seeks to address selected bottlenecks to spur productivity across sectors, which will be critical for growth amid the less favorable external environment. Reforms supported include those geared to improve access to financing for investment in infrastructure and physical capital for firms; measures to strengthen labor force skills and reduce labor supply-demand skill mismatches; and measures to reduce barriers to innovation and trade costs in the private sector. The supported program is fully consistent with the FY12–FY16 Colombia Country Partnership Strategy (CPS), discussed by the Board of Executive Directors June 12, 2016, particularly with the pillar on inclusive growth with enhanced productivity; and with the Government’s National Development Plan (NDP) for 2014-2018, in its strategic area of infrastructure and competitiveness and the pillar of education. The first DPL for US$700 million was approved by the Board of Executive Directors on December 12, 2014. This operation is part of the country’s pre-financing planning for 2016. The proposed operation builds on the efforts of the first DPL in the series and supports a second round of reforms focusing on: (i) fostering solutions to develop infrastructure financing and increasing access to finance for firms; (ii) building productive skills and improving their allocation; and (iii) strengthening regulations that affect innovation and business efficiency.